Nampa (670 KBOI News) – Wow…the stock market has really taken a beating these last few months hasn’t it? That must mean the economy is headed back into the tank, right?
Not really, says NNU economist Dr. Peter Crabb. He says while the stock market and the economy are relatives, they’re not one and the same.
“The prices of these stocks reflect the expectations of how good those profits are going to be,” said Crabb. “Therefore, if the economy is good, profits are going to be better, so we say stock prices are a forward indicator.”
But that said, he says in situations like what we’re seeing right now, the markets can be down, while the economy is doing well.
He says right now, stocks are overvalued, and that is largely why the market is in a correction…which happens when the indexes lose 10% of their value.
When they lose 20%, it’s called a bear market…and he says we’re not there yet.