Posted 1/25/2024, 1:21:00 AM
Krugman Warns Against Letting Market Optimism Drive Economic Confidence
- Krugman Consumer optimism is surging along with the stock market, but equities are a poor predictor of economic health
- Stocks often move based on sentiment rather than rationality; Americans should ignore indexes as a macro indicator
- Even recessions can spark stock rallies if rates get cut; profits and economies don't always move together
- Most Americans have limited direct stock holdings, so indexes shouldn't hugely sway consumer confidence
- High visibility of markets leads people to overweight impact of stocks on broader economy