The view that the stock market drives economic growth originates from the observation that changes in stock prices precede changes in economic data.
Despite the observation that stock market changes lead changes in the economy does not mean that the stock market drives economic activity.
Can a rise in investors' optimism because of stock price increases cause a further strengthening of stock prices? In the absence of increases in the money supply, an increase in stock prices will divert money from other assets, thus pushing the other asset prices' momentum lower.
Does the factor provide support or undermine savings? Following this reasoning, we can suggest that a rising stock market does not expand the pool of savings and cannot generate positive economic growth.
What about the view that a stronger stock market makes individuals more optimistic about the future? This in turn, it is believed, strengthens the demand for goods and services and strengthens economic growth.
Historically, the market selected money such as gold, and in the absence of central banks, an increase in stock market prices will reflect the increase of the pool of savings and lead to economic growth.
Popular thinking claims that a rising stock market increases economic growth, something that is questionable.
https://mises.org/wire/rising-stock-market-does-not-drive-economic-growth
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