Skip to comments.Will The Real Economy Please Stand Up? Which Indicator to Believe, the Dow or the GDP?
Posted on 10/27/2018 6:17:21 PM PDT by SeekAndFind
As of right now, there are two different views of the economy: The stock market view, which for now is bearish, and the GDP view, which is bullish. Which one is right? And which one will the Federal Reserve believe?
Stocks have been in a tailspin since early October. The Wilshire 5000 Total Market Index, which includes more than 3,700 stocks, has fallen by nearly 10% since the start of October a net loss of $3 trillion in market value. It's a big hit for the economy to sustain.
OK, but what about GDP? The nation's output of goods and services rose at a yearly 3.5% rate in the third quarter, beating expectations for 3.3% growth by most Wall Street economists, after rising 4.2% in the second quarter. More than three fourths of the GDP growth came from one sector: personal consumption. That's being driven by a 4.1% jump in personal disposable income, fueled by this year's bonuses, raises and fatter paychecks following the Trump tax cuts.
Even better, the GDP price deflator the broadest measure of inflation rose at an annual rate of just 1.6% in the third quarter. So from an economic standpoint, we have the best of all possible worlds: Fast growth and low inflation.
The message couldn't be more mixed. The market and economy appear to be in a tug of war over the future. The outlook is further clouded by the fact that no one knows how the midterm elections will turn out, or what President Donald Trump will do on tariffs, tax cuts and more deregulation.
Even so, consumer confidence as measured by the IBD/TIPP Economic Optimism Index has been moving up in recent months. So the downturn on Wall Street hasn't yet affected the mood on Main Street.
(Excerpt) Read more at investors.com ...
The Dow is being deliberately tanked by globalist billionaires like Soros.
The way I see it is that the DOW and other parasitic indices are falling because WAGES are finally rising proportionately to their influence on the economy.
Yes, capital is vital, but rising stock prices while artificially suppressing the wages of the productive WILL eventually bite you. We have arrived at that point, and the correction is beginning.
Stock market is manipulated. This has been true for a very long time.
Sorry about the poor grammar, I’m having a rough night...
China and Soros are selling billions in funds, and bonds are getting killed by rising nterest rates.
Both smell of attempts to hurt trump going into the election.
Ditto that. October is always bad anyway, something about brokers trying to make their numbers every year about this time. But many of Trump’s adversaries from nations to leftist globalists are trying to pull it down. Our elections are the worlds elections. The downside of being at the center of all the worlds markets.
Earnings have been phenomenal. One thing that happens in October is the market pricing in future guidance. Amazon in particular is seeing some slowing predicted this Christmas. An outside observer might relate that to the economy, but it has much more to do with growth leveling out from meteoric to just good. This market is still overpriced.
The stock market is not efficient like has been argued and has no bearing on economic reality
IMO the Wilshire and SP500 were about 50% overpriced due to the current bubble. A correction can be good. However the situation is fragile thanks to our federal government’s fiscal madness. For starts, having more people getting more from the government than paying is terrible.
What about jobs?
Yes, yes, yes.
Coincidentally that monster screwed up interest rates at the Fed to crash the vibrant economy in time for this election and for lead up to 2020.
Then, I am sure Soros types are manipulating the stock market to hurt Trump and scare people just before the election.
I hate both of them so much.
No one on FR responded to my posts this year when I noted that our Holy Bible contains admonitions against following soothsayers, entrail readers, those who worship the constellations and heavenly bodies, and diviners. Moses had to show Go’s magic was superior so that of the Eqyptian magicians at court—not to prove that their magic did not work.
There are today women witches who cast spells against Trump and Kavanaugh. This is pure Democrat evil.
God did not say “ what silliness to believe in that imaginary spell stuff”, He said to avoid the potent power of the magicians and sorcerers.
I am struggling to stay away from curses against our enemies. My constant Bible commentary readings and prayer are my mainstays. I have to hold on.
Stocks will recover. Relax.
The Dow is run by a bunch of timid weaklings who do what they think they should in reaction to events around them. Wall Street is almost totally divorced from the economy.
I agree. Leading up to the midterms we see what is happening. doxing and banning anyone right of center on all social media, fake sexual assault charges on Kavanaugh, the caravan, attacks, and the DOW being sabotaged. Tin foil hat?
Maybe, however I don’t trust these fake dossier deep state power players.
The Fed cost the DOW a 1,000 points in last couple of months with too aggressive rate and future rate hikes. They are tapping down the economy to early. They are in charge of putting the skids on growth. The unelected few.
The stock market is usually LOOKING FORWARD by several months. It is never a good indicator of current economy. Since only God knows for sure where economy will be 6-9 months from now, the stock prices are simply best guess by human beings as to what is coming.
Right now, there are 4 negatives/worries for the market.
1. Interest rates are going up, which is a lagging
indicator, and confirms good economic conditions at the
2. China trade deal is a huge unknown.
3. Market was seriously overvalued before recent decline.
Believe it or not it is still overvalued based on
average inflation-adjusted earnings from the previous
10 years. But the market can fluctuate a lot from the
10 year average.
4. Debt is high everywhere, especially in Asia.
FED is still way below historical rates based on REAL INFLATION, not the phony CPI number used to calculate raises for social security checks.
The FED is trying to build some room for looser monetary policy when the economy slows down. If they kept ZIRP for ever, the future recessions will become depressions.
Correct on all points. 50% overvalued and 10% decline is still overvalued.
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