The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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Leading On The Dance Floor

Recent data suggests that the economy is sputtering somewhat, but I’m not particularly worried about that.  It probably suggests the GDP growth rate is slowing from the 3.5 to 4.0% range to a more sustainable 3.0 to 3.5% range.

Does that suggest the stock market is slowing?  No!  Over the last 115 years, the Dow has dropped 30% or more thirteen times.  The average bull market following each of these drops was 8.8 years.  The current rally is below average in both length and strength.  Take a look at this chart:

Chart of the Day
The normal relationship between the stock market and the economy is that the stock market predicts the economy.  It normally leads by six to nine months!  That suggests that, since the stock market bull has longer to run, that the economy will soon be picking up more momentum.  I certainly hope so, but we have been hoping that for a long time.
On the dance floor, my wife tells me to lead, even when I’m barely clutching my last shred of dignity.  In the economy, the stock market is telling the elected clowns in Washington to lead.  Unfortunately, they don’t remember how to lead any better than I do . . .

At least, my wife doesn’t tell me to “lead, follow, or get the hell out of the way!”