Sloan: Proof! The stock market is no crystal ball into the economy’s outlook.

One of the great Wall Street parlor games is trying to divine what the stock market is telling us about the future of the economy. That’s especially true in a market like this one, which is down sharply for the year, the occasional daily uptick notwithstanding.

After all, the thinking goes, if today’s stock prices reflect what investors are willing to pay today for a stream of future earnings, there’s a macro-economic message lurking in there, right?

Probably not.

No, I’m not going to use the old line about falling stock markets having predicted 11 of the past five recessions. Instead, I’ll show you how little weight is accorded to stock prices by serious economists whose job is to estimate the future course of the economy.

I’m talking about the Conference Board Leading Economic Index, often known by its former name, the index of leading economic indicators.

Read more: Washington Post


Allan Sloan is a columnist for The Washington Post. He is a seven-time winner of the Loeb Award, business journalism’s highest honor. View Archive


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