How Bad is it?
Sunday, March 16, 2008
What I think is interesting about the current state of the economy is that the stock market doesn't quite seem to reflect the reality of whats going on around across the country. Energy prices are skyrocketing, headline inflation in general is racing upward, the US dollar is at all time lows, and the sub-prime crisis seems to be spreading like wildfire. The S&P 500 is down about 18% from its peak - but that hardly seems catastrophic compared to how bad a lot of companies and individuals have been feeling it. And every night talking heads go on TV and fight over whether or not the US economy is in recession at all. Nevertheless, I came across this video tonight from BBC News, which really is pretty eye opening.
I think it raises an important question... is the stock market forward looking in the sense that it is signaling that things aren't really that bad and we'll be able to weather this economic funk? Or is the current state of the economy not fully reflected in the stock market, and does that mean the stock market is in for another painful slide downward?
I don't know the answer to these questions - no one does - and there is a lot of speculation about what it all means; but I think realizing that there might be a disconnect between the stock market and the rest of the economy could be important as more information about the economic situation surfaces.
Posted by Rob Pitingolo 8:47 PM
1 comments:
- At April 8, 2008 11:21 PM Rocko Chen said...
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The economy causes shifts in sentiment, and sentiment drives supply/command of the stock markets.
The underlying liquidity (supply/demand) affects stock prices directly.
Interesting video.
