Economic Recovery Trickle Down

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With the Dow now well over 13,000, data from the stock market continues to look more and more promising.  But most of us aren't as worried about paying for stock options and ETF's as we are about paying our bills or for our next meal.

So if the recovery hit Wall Street already, when will it hit main street?

Turns out it can take a little while for stock success to trickle down to every day consumers.

University of Alabama in Huntsville Marketing Professor David Berkowitz says, "The stock market just is an indicator of how well people think stocks are going to perform, so in some sense it is a relationship between the actual performance of the stocks and how they're going to do in the economy.  But in reality they are a leading indicator, meaning that the stocks tend to rise in advance of the economy actually getting better."

Think of the economy like a car at a stop sign.  Rising stock prices are like revving the engine.  You can tell it's ready to go, but the coast just isn't quite clear yet.

Berkowtiz explains, "There is a lag effect, and it can be varied depending on where we are in the country, what our local economy is like relative to a national economy."

Stocks currently show cause for a lot of optimism.

In another six months, that could translate into dollar totals we're more familiar with.

Berkowitz says, "The economy has seen its trough.  I don't think we're going to head back down.  What we'll see is some positive movement forward."


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