John thinks, for the average person trying to decide how to feel about the economy, the single biggest data point is the stock market. When share prices are rising, the implicit message is that finance professionals — who, after all, dedicate their lives to understanding such things and should therefore know what’s happening — have decided that life is good and getting better.
So the rest of us relax and go shopping. Known as the “wealth effect,” this tendency of asset prices to affect consumer behavior is now a key policy goal of the US and pretty much every other major government.
But what if it’s all a gigantic, multi-trillion-dollar con? That’s the conclusion a growing number of analysts are reaching as they dig into the reality behind the recent record highs in US equity prices.
