Quote:
Originally posted by Tyrone Slothrop
If you accept the statistically sampling involved -- perhaps likelier if you're inclined to accept the Lancet estimate of 600K dead in Iraq? -- then it suggests that good things have happened to stock prices, assuming that the delta in stock prices is meaningful if you control for inflation, etc. This might mean that good things haven't happened yet, but are so expected that stocks are trading on the basis of these expectations. Whether you think it means something wonderful about the state of the world or the country depends on whether you think stock prices are a good barometer of such things. If, e.g., stock prices are up because corporations are receiving the lion's share of productivity gains that used to be split between companies and workers, then maybe it doesn't suggest that everyone ought to be joyous.
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When it comes to Macroeconomic theory and the stock market I get completely lost. I think a lot of psychology comes into play there (as Ty referenced)but I really don't know. I do know that economic growth is good, but sometimes we have a good stock market when the economy is not growing and visa versa. Why that is I have no idea.
When the economy is growing, generally everyone is better off, when the stock market is growing not everyone is better off. Although that is chaning now that everyone seems to have pension funds that are some how tied to the market.
The best barometer for determining the health of the economy, in my opinion, is growth. But of course, that could just be because I have a better understanding of the Macroeconomics of growth and not of the stock market.
