I know I'm tiresome on this point, but this is your regular reminder that the stock market did not, in fact, break any records today—regardless of what the Wall Street Journal mindlessly regurgitates. Here is the S&P 500:
The S&P 500 peaked in late 2021, fell throughout 2022, and has not yet made up that loss. It still has about 300 points to go before setting a genuine record.
Meh. The stock market is not the economy. For that matter, the stock market is not your portfolio ... at least, in most cases.
I know, I know; it's a number. A single number. The thing lazy reporters whore after like it's the holy grail, a metaphor that mixes rather poorly. Okay, say it's a number, like the latest Presidential poll. Bingo, bango! Quote that thing and your story's done!
Thanks for putting this tendency into perspective, Mr. D.
"The stock market is not the economy."
The stock market is a forward-looking measure of the economy.
There is no single measure of the present-day economy, with the economy being the cumulative sum of countless activities. Perhaps the closest is GDP, which is estimated by the BEA once every three months, then revised later, and what the number is at any one time is somebody's guess in the past about previous activity, while estimates of what the next GDP read will be, despite painstaking effort by some of our most esteemed institutions, are usually and notoriously wrong. Other economic measures, like the inflation and unemployment rates, are reported once per month, and no one would accuse them of being a single measure of "the economy" either.
Different measures measure different things. If you want to know how the economy is doing, you ought to take a number of measures into consideration and see what the weight of the evidence indicates. But most people don't do that. Which is fine. Who cares, really? Most people don't know the GDP growth rate. Or the inflation rate (except when it's in the news). Or the unemployment rate (except when it's in the news).
What is in the news every single day is stock market news, and if there's only one piece of economics news that people hear over and over it's what's happening with the Dow Jones Industrial Average. It's on the radio news every hour, on the nightly network newscasts on TV, and in headlines online and in the paper. You might even hear what the Dow futures are doing on NPR's 5-minute news summaries at night. As if that's important for everyone to know.
The Dow closed on Monday at 38,001.81, up 138.01 points, a gain of 0.36%. It's a very precise number. Not an estimate that will be revised next month. Millions and millions of people are going to hear about it. For a large percentage of them, it will be the only news about the economy they'll hear all day. Then tomorrow will come and the stock market will move and people will hear all about it then.
That's why I think stocks reaching all-time highs* has a bigger impact on people's general perception of "the economy" than many other measures that economists (and politicians, people like us, etc.) pay attention to.
* And yes, the stock market closed at an all-time high. The Dow and S&P 500 are indexes that never closed before as high as they did today. It doesn't mean anything beyond that. If you want to create a new index that includes adjustments for inflation and dividend reinvestment, go ahead. Nobody's stopping you.
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Party poopers….
So in other words the market hasn't yet peaked. Awesome!
Are you sure the WSJ is regurgitating it mindlessly?
I've finally constructed a narrative as to why the Beveridge Curve is vertical and the Phillips Curve remains broken. It's all about the attempt to catch up on work and manufacturing backlogs.
Breaking out of the vertical V/U and fixing the Phillips Curve relationship requires erasing the backlogs. The backlogs serve as headwinds to a recession. The rise in the Fed rate slowed the economy down such that the backlogs could close the gap, but not enough to reset the Beveridge and Phillips.
Sorry to tell you KD, but it doesn't look like your long and variable lags will result in a recession this year. The backlogs remain and they're still fairly large.