[quote=Rich Toscano]Yes, I do… I think people put entirely too much credence on stock prices as an indicator of economic health. Also since so many people own such investments, they freak out when values drop and vice versa.
So my bet is that consumer confidence is heavily influenced by stock prices, ie that there is a causal relationship. I doubt you would spot the lag on a multi-year chart like that, but I’ll bet that if you could look closely you would indeed see that confidence trails stock prices. Anyone know of a chart that could confirm/deny my suspicion?[/quote]
No chart, but would absolutely agree with you about the stock market leading consumer confidence. I’ve heard it from so many people, I can’t even count. When the housing market started turning down, and some of us were trying to warn them, they would point to the stock market and claim that it was a “leading indicator” so all was well with the world. It was only after the stock market started tanking that people (especially those not paying attention to anything else) started getting scared.
