Despite what you might read or hear, the stock market is not the economy. But that does not mean you should ignore the effect that the stock market has on household income and spending, the labor market, overall financial conditions and economic growth. A 2021 paper in the American Economic Review ... READ MORE >
equity markets
Risk metrics: Monitoring distress in the U.S. financial sector
As this latest episode of banking distress makes clear, the health of the U.S. economy depends on the health of the financial sector. Even if a business seems far removed from Wall Street, trends in the financial markets have important implications on that company’s fiscal health and operations. U.S. ... READ MORE >
RSM U.S. Financial Conditions Index: Pricing in the cost of uncertainty
The recent decline in financial conditions eased in recent weeks as the markets moved from pricing in the risk of holding assets at a moment of deepening geopolitical stress to one of resignation. In our estimation, the likelihood of a protracted conflict in Eastern Europe and higher oil prices as ... READ MORE >
U.S. financial conditions tightening due to equities rout
U.S. financial conditions have tightened in recent days as investors have pulled back on riskier assets, causing the S&P 500 to shed 4.3%, the Dow Jones Industrial Average to drop 3.32% and the NASDAQ to fall 6.1% over the past three trading sessions. The Bloomberg Financial Conditions Index is ... READ MORE >
The case for active investing has grown stronger recently, but can it last?
For much of the past decade, equity markets enjoyed a bull market that was accompanied by the rise in the popularity and outperformance of passive investment strategies. Investors were attracted to their low fees and were persuaded by the argument that active managers could not consistently beat the ... READ MORE >
Defying gravity: The growing disconnect between the real economy and surging equity markets
There is a growing disconnect between the real economy and equity valuations that, if sustained, will result in slower growth and increased regulation of the investment industry. And that, in turn, will further undermine the legitimate underpinnings of capitalism. The link between the two is broken ... READ MORE >
Real economy faces severe test as coronavirus challenges to business activity mount
Volatility across asset markets and the end of the 11-year bull market run in equity prices strongly implies that the current business cycle will soon come to an end, if it hasn’t already done so. The exogenous shock of coronavirus, which has triggered severe financial shock and profound second-order ... READ MORE >
Monitoring financial risk during pandemics
Global market participants have priced in the imminent reopening of the Chinese economy, while the World Health Organization has cautioned that it is too early to declare that the virus is at its peak. It is clear based on news flow over the weekend and into Monday's early-morning session that it ... READ MORE >