Stock Market in Tizzy, Economy in Shambles – Is this Possible?

Stock Market in Tizzy, Economy in Shambles – Is this Possible?






At first thought, this idea of stock market’s performance being divorced from that of the economy’s performance sounds counter intuitive, but it isn't so. Mexico is a classic example of this – Mexico’s stock market has risen by 200% (in $ terms) within a decade around 2000-2010 making it one of the hottest stock markets in the world while it’s economy has grown at a Hindu growth rate of 3% even during the boom period of 2003 to 2007.

 This is possible as the companies listed on Mexican the stock exchange derive 50% of their revenues from offshore operations. Additionally, the sectors that drive the local economy are not listed on the stock exchange – manufacturing exports and oil and gas. Manufacturing exports primarily constitutes car exports to US companies like Ford, Chrysler which is the chief driver of the domestic market. This establishes a high degree of dependence of Mexican economic growth on that of America’s growth.






Happy Investing
Source:Prosperotree.com