"Stocks are the single-best barometer of our nation's future economic health".
What?
This is what CNBC's Larry Kudlow recently wrote on his blog when discussing the June jobs report which saw 467,000 jobs shed.
Larry, the stock market is no longer an economic indicator. It hasn't been for over a decade, maybe ever.
What about the stock market rally after the crash in October of 1929? The market crashed on October 28th and 29th of 1929 from 299 to 230, proceeded to rally back to 294 by April 17th of 1930, then slowly crashed again to 41.22 on July 8th of 1932, only finally to "recover" to 299 again in March of 1954, 25 years later. (Source: measuringworth.org/DJA/)
What about the more recent dot com boom and bust?
What about the overnight ccollapse of stocks like Lehman Brothers, AIG, Bear Stearns, and Fannie and Freddie. One day they looked like a safe investment, the next day they were done.
If the stock market is such a great indicator then how come the market never saw this economic crisis coming down the tracks like a freight train?
Rather than the market being driven by economic fundamentals, it has been driven by fear, greed, and optimism, in other words emotions. Which is all the more reason why the recent strength in consumer confidence, which is a reflection of the stock market recovery off of its lows, is an indication that the tail is wagging the dog.
The stock market provides no better insight into our economic future than Ben "Baghdad Bob" Bernanke's "green shoots" do.
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