It has been famously said that the stock market predicted nine of the last five recessions. In other words, sometimes a stock market drop indicates trouble for the economy and sometime it doesn't. Well we just had a big drop; is that an indicator of a recession coming? Maybe. (Sorry to be so definitive on the subject.)
This morning we also got revised figures for the real GDP for the second quarter. In this latest revision the growth rate was a respectable 3.7%. That brings the growth rate for the first half of 2015 up to 2.1%, which is really poor. On the one hand, we had the economy accelerate through the second quarter and now two months later we have the stock market fall. Who do we believe?
It's a conundrum. Clearly, one good quarter does not mean all that much for the long term. We've seen higher growth that evaporated during the last few years. By the same token, a big drop in the stock market, followed by what is now looking like a big recovery may also mean nothing. The truth is that we're all going to have to wait to find out.
This morning we also got revised figures for the real GDP for the second quarter. In this latest revision the growth rate was a respectable 3.7%. That brings the growth rate for the first half of 2015 up to 2.1%, which is really poor. On the one hand, we had the economy accelerate through the second quarter and now two months later we have the stock market fall. Who do we believe?
It's a conundrum. Clearly, one good quarter does not mean all that much for the long term. We've seen higher growth that evaporated during the last few years. By the same token, a big drop in the stock market, followed by what is now looking like a big recovery may also mean nothing. The truth is that we're all going to have to wait to find out.
No comments:
Post a Comment