Understanding and predicting the economic weather is less precise than, well, predicting the weather. The stock market is a composite “vote” of the direction and strength of corporate profits in the coming six months to a year. It is not a barometer of what the economy will do, but an indicator of people’s predictions, their fears, their hopes. Predicting the economic weather involves a complex interplay of many factors, which, by themselves, are not that complicated. It is the interplay and the weight, or importance, given to each factor that accounts for the range of prediction.
Henry Blodget is a former Wall St. analyst who was indicted by the Securities and Exchange commission for ethics violations during the “dot com” boom at the end of the nineties. Blodget subsequently founded the Business Insider, a blog about trends in business and the economy. Here is a compilation of charts on the labor market, housing, and manufacturing output for several decades. You may or may not agree with Blodget’s dire prognostications but the overall picture of data that he has pulled together is worth a look.