The stock market’s annual performance is comfortably in the black again. After a brief slump into negative territory on a year-over-year price basis in late-September and early October, the S&P 500 is higher by 4.9% through Oct. 21. Is that a sign that the economy will keep growing? History offers some evidence for responding with a cautious “yes.”
The usual caveats apply, of course, starting with Paul Samuelson’s famous remark that the stock market has predicted nine of the last five recessions. Perfection is not Mr. Market’s forte when it comes to discounting the future. The same is true for every other forecasting technique (or forecaster), which brings us back to square one: Does the stock market have any value for evaluating the macro trend? Yes, it does, or so the track record suggests.
