Monday, August 19, 2013

Differences between stocks and the economy

Why do stocks sometimes rise when the economy is in the ditch? They're not as tightly coupled as you might think.

First, GDP is a trailing measurement whereas stock indices are a speculative leading indicator, with all the uncertainty that implies.

Secondly, the interests of the general US economy and those of largish corporations are imperfectly aligned at best, with a number of factors impacting each unequally and at times in opposite directions.

This comes from an excellent discussion on Quora: How does QE translate to all-time highs of equity indices?

A political economy

A recent piece in the Economist ( A new anthology of essays reconsiders Thomas Piketty’s “Capital” , May 20, 2107) ends with these words: &q...