Could somebody with an A level in Economics explain something to me about the stock market and growth.

[SlowDoris]

Oh wise women of Mumsnet - My understanding of economics is a bit basic – can somebody explain what I’m missing? How is it the case that the FTSE 100 is hitting record highs, but growth is poor?
I understand shares to be a share in the profits a company makes, so share prices rise if a company does well, or is expected to do well. For example, if you bought Apple shares in the 1980s, a) the money you were receiving in dividends and b) the share price would have gone up massively, as Apple expanded. In the opposite direction, shares in a company that was not successful would go down. For example, in the dot com bubble.
I understand growth to be the increase in a country’s GDP, the amount of goods and services we sell.
So how come we’re not increasing the amount of goods and services we sell (much), but the companies on the stock market are reaching record highs? Can somebody explain it to me in a very simple way?!

Many of the companies listed in the FTSE100 are large multinationals. They are not investing (and employing people) in the UK but in countries where they can grow better. Therefore the companies are making profits, but outside the UK.

For example, when Ireland cut its rate of corporation tax a lot of companies moved there, employing locals.

Aha! Thank you, that was simple. Thank you for explaining something that was presumably obvious.

I had not realised they were multinational - I thought the FTSE was British companies, Dow Jones American, Hang Seng Hong Kong etc. 😳

Also "doing well" often means "the share price is rising" which is good news...for those who own shares! These shareholders could be anyone anywhere, including institutions such as pension funds.

No, that’s just where they are listed.

companies can choose which stock exchange they want to list on.

Lots of companies lately have chosen to list in New York rather than in London, because there was less investment going on in the LSE (London Stock Exchange).

Yes that was kind of my starting point - how come share holders are making record amounts of money but none of it's going into the economy?! I guess it is going into somebody's economy, but not necessarily ours.

Absolutely.