Stock Market and GDP Both Fall Short as Bellwethers
The usually reliable Edward P. Lazear gets it badly wrong ("The Stock Market Beats GDP as an Economic Bellwether?," op-ed, July 31). Of course it does. Stock prices are based on expectations about the future. GDP only reports what has already happened. Of course stock prices are "better than GDP." But stock prices are still not a very good predictor of future economic activity simply because there are many other factors that affect stock prices (interest rates, corporate profits, and so on).</br></br>I await Mr. Lazear's article discussing factors that are actual predictors of the economy. To paraphrase an old saying, the stock market has predicted four out of the past two economic recoveries.</br></br>Prof. Tony Lima, Ph.D.</br></br>Calif. State Univ., East Bay</br></br>Hayward, Calif.