Stock market going up steadily

New York Stock Exchange

Over the past month or so, the stock market in the US has been steadily climbing. The Dow Jones Industrial Average (the most popular index) is close to reaching the 11,000 mark which it has not seen since the stock market began its free fall in autumn of 2008, almost one and a half years ago. The stock market alone is not what is most important here though. Its importance comes in the form of being somewhat of an indicator to how the economy and perceptions about the economy are doing.

Over the last 18 months or so, the stock market has seen a major fall, followed by a smaller increase and a subsequent fall. The rises began to be a little bigger than the falls that followed them and that allowed the stock market to slowly inch higher. Over the last month or so, the market has trended higher and that mirrored the general view of how the economy has been doing. The jobless data in the US has been getting better, although not where it needs to be yet. Also, the housing situation has been improving as well with more homes gaining value than losing value. Add to this, an up tick in consumer confidence and a few other more positive factors and the current economic situation is on course to a self sustaining recovery.

A self sustaining economic recovery is what everyone is waiting and looking for. That means that the economy is in a phase of expansion from natural sources as opposed to being jolted by government actions such as spending or tax cuts. This will have to happen at some point because the government can not take these types of measures on an indefinite basis as it costs money which will be added to the deficit and will need to be paid for before it becomes unmanageable. It appears that the economy is either already sustaining its own growth or if not, then it is very close to doing so.

For the global economy and just about every major individual country’s economy, what happens in the US is almost as important (and in some ways more important) than what happens at home. The US economy represents approximately 25% of the world’s economy, more than any other single nation by far. This does not include the European Union as a single nation because each member nation’s government is more powerful than the EU government on policy.

Therefore, everyone should be looking at the US economic data along with their home country’s data (if they are not American). Americans should also keep an eye out for other major economies’ data as this world is incredibly intertwined and other nations can affect the US economy in various ways. Regardless, it appears that the US and therefore, the global economy is getting stronger and is starting to gather some much needed steam that will hopefully take us all to a phase of great economic expansion.