See Stocks Run : The Indicator from Planet Money The stock market has been on a wild ride lately. Today, the Indicator looks at what's going on and whether we should worry for the economy.

See Stocks Run

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STACEY VANEK SMITH, HOST:

The stock market.

(SOUNDBITE OF STOCK EXCHANGE OPENING BELL)

CARDIFF GARCIA, HOST:

Yeah, the stock market.

VANEK SMITH: So we usually do not talk that much about the stock market on the show just because the stock market tends to jump around a lot. And it can be really easy to get lost in the little ups and downs and miss the larger story the economy has been telling. But lately the stock market has gotten really hard to ignore. And it does seem like it's telling a larger story.

GARCIA: It's been a rocky stretch for the stock market. And earlier this week, the Dow Jones Industrial Average had actually erased all of its gains for the entire year. And a lot of people were talking about it.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED REPORTER #1: Good evening, everybody. Our top story is major market turmoil today. The Dow Jones Industrial's fell more than 2 percent.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED REPORTER #2: All 30 Dow stocks are now in the red. And the Dow's gains for the year are gone.

(SOUNDBITE OF ARCHIVED RECORDING, CARL ORFF'S "CARMINA BURANA")

UNIDENTIFIED REPORTER #3: And the bear is certainly on the attack. The Dow and S&P 500 erasing their gains for 2010 - now both in negative territory, the S&P firmly in correction.

VANEK SMITH: I love the opera music.

GARCIA: That's amazing.

VANEK SMITH: That is awesome (laughter).

GARCIA: You know what that sounded like? It sounded like the musical representation of that emoji that has Elmo with the fire in the background, you know?

VANEK SMITH: Yes.

GARCIA: That's what I thought was going on there.

VANEK SMITH: Yeah, like not to be overly dramatic, but the world is ending. The stock market is down.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

VANEK SMITH: This is THE INDICATOR from Planet Money. I'm Stacey Vanek Smith.

GARCIA: And I'm Cardiff Garcia. Today on the show, what is going on with the stock market? And what does it mean - or not mean - for the rest of the economy?

VANEK SMITH: Also, why watching someone walk their dog might help you feel better about everything.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

VANEK SMITH: If you look at a graph of what the stock market has been doing this year, it is nuts. It's up. It's down. It's back up. It looks crazy. And frankly, it looks a little scary and worrisome.

GARCIA: We wanted to get some perspective on this, so we called up our old pal Josh Brown. He's the CEO of Ritholtz Wealth Management. And he's been helping people manage their investments for most of his career.

JOSH BROWN: So this is not a particularly volatile year.

VANEK SMITH: Huh.

BROWN: So it just happens to be so much more volatile than last year. Last year was one of the least volatile years for the stock market - the U.S. stock market in the history that we've been keeping data, which is very remarkable when you consider how volatile the headlines were - especially the political headlines. Meanwhile, the stock market didn't blink. That's very, very abnormal - to have such an utter lack of volatility. This year is a totally different story. So this is - it's a typical year in some ways because volatility is probably normal. But if you look at it only compared to the year we've just gone through, it looks bananas. So that's why having all of this historical context is so important for investors. You know, if you landed here from another planet, and you only experienced the stock market of 2017, then what's going on right now feels like a nightmare. But if you've been around for 10 years, 20 years, and you understand that we go through these shifts, it's a little bit less jarring.

GARCIA: And if you back up a bit, the picture looks much better. In the last five years, the U.S. stock market has gained about 50 percent in value. That is a really solid little stretch.

VANEK SMITH: That said, this year has been really jarring - especially lately tech stocks, the famous FANG. And, Cardiff, I've been waiting for a really long time to say FANG - the FANG Five, the Fabulous FANG, the FANG Gang, the FANG Five. I've got a million of them.

GARCIA: You have been waiting. You should tell everybody what they are for first though.

VANEK SMITH: I should tell everybody what they are. FANG is an acronym for the big tech giants - that is Facebook, Amazon, Apple, Netflix and Google. And these stocks seemed unstoppable for a long time. They just went up and up and up and up. But in the last month, all of these stocks have fallen like rocks.

GARCIA: But Josh says you should beware the FANG. And he's talking here about the acronym - the idea that these companies should necessarily be grouped together because these companies are separate. A couple of them happen to be struggling for reasons that are specific to them. Josh points out that tech has been like the shining sector for years now. Think about how, like, oil stocks and banking stocks were in the 2000s. These things go through cycles. Some part of the economy gets really hot. The stocks go up, and eventually they go down.

BROWN: I think in every market era - in every bull market, there are going to be leaders. And those are the stocks we are going to fixate on. And it just so happens that in the most recent bull market the technology - the large technology companies really glued to an outsized portion of the market. So that's why we're so fixated on them. They made a lot of people money. We all use the products. But it's not forever. And this year we've seen the other side. So Facebook runs from $20 dollars to $220, and it makes you want to kill yourself if you didn't buy it. Now it's gone from 220 down to 140 - shows no signs of stopping. And that's both sides of the equation right before your eyes. And there will be another group of stock someday, and we'll come up with a nifty acronym for them. I think the moral of the story for investors is to not run away and join the circus every time a specific sector seems like it's invincible. It never is.

GARCIA: So the tech sector may be starting to take a normal place in the markets now. But where does that leave the rest of us?

BROWN: This might be the first year in 10 years where Main Street outperformed the Wall Street.

GARCIA: Josh says the stock market has had a rough year, but the economy overall has been great. Unemployment is super low. Wage growth has been rising impressively for the first time in a while. People who had stopped looking for jobs a long time ago have started re-entering the labor market. So the market's a rocky year. But for U.S. workers overall, 2018 was pretty great.

BROWN: Main Street is doing great. When you look at consumer confidence, all these numbers are at multi-decade highs. When you look at small business surveys, all of the small business owners are extremely confident. Wall Street's doing nothing. Stock market is now down on the year - or flat on the year. I don't think bonuses are going to be great. I don't think anyone is particularly happy with how their stocks have done. So that is the first time you've been able to say that in 10 years - that this was a great year for Main Street and a not so great year for Wall Street. Most of the time, it's been the reverse.

VANEK SMITH: No bonuses - cry me a river. But really, like, score one for the little guy - finally Main Street gets a break. This is great.

GARCIA: Also they are going to get decent bonuses anyway.

VANEK SMITH: Yeah, like, what's a not decent bonus? What is a bonus?

(LAUGHTER)

VANEK SMITH: Let's talk about that.

GARCIA: Here's the thing though. Wall Street is often talked about as like a kind of leading indicator for the rest of the economy - as in, if the stock market collapses, maybe the economy is going to follow it down. So if all of these big companies are seeing their stock prices go down, how long before that also shows up in the real economy - in less hiring and more unemployment, shrinking consumer confidence?

BROWN: And I'm now going to give you my favorite analogy. So a woman is walking through Central Park, and she's got a dog. What's a very active kind of dog?

VANEK SMITH: Oh, like a Jack Russell terrier or something like that?

BROWN: Fine. Jack Russell Terrier is great. If you just looked at her, what is she doing? She's taking normal steps. She's going in a straight line. She's walking, you know, upright at a moderate pace - nothing terribly exciting. Then let your eyes pan down a little bit. Look at the dog. The dog is going crazy. It's chasing birds. It's digging up clumps of mud. It's running at trees. It's peeing all over the place. The dog is the stock market. The woman is the economy. The dog is chasing butterflies, then it's sniffing itself, you know. So if you're just watching the dog, you're not watching the economy. You're watching the manifestation of hundreds of millions of people's greed and fear with buying and selling. But you're not watching an actual representation of how the economy's doing. So it's important to understand that, yes, the stock market leads the economy and, to some extent, reflects the economy...

VANEK SMITH: Yeah, they're connected, like the dog and the...

BROWN: Yeah, the dog's going walk in the general direction that the woman walks the dog. So the economy and the dog - or the economy the stock market are somewhat connected. But they do not look the same. They do not act the same even if they're walking in the same direction.

GARCIA: In other words, just because the stock market is having a crazy year doesn't mean the economy is going to go crazy too. And there's some good news in all this. If you contribute to a 401k or if you want to start investing in the stock market, then guess what? When stocks trend down like this, it's basically like buying things on sale.

VANEK SMITH: And it is after all Black Friday - day of sales.

GARCIA: Exactly.

VANEK SMITH: And Josh says, in the meantime, we should all just try to keep our eyes on the calm dog-walking woman.

That's a great analogy actually.

BROWN: I agree.

VANEK SMITH: Yeah. And keep our eyes away, says Josh, from the sometimes operatic drama of the dog. Happy shopping, everyone.

(SOUNDBITE OF CARL ORFF'S "CARMINA BURANA")

GARCIA: Oh, my God.

VANEK SMITH: (Laughter).

(SOUNDBITE OF CARL ORFF'S "CARMINA BURANA")

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