SAP A.G. Message Board - Msg: 5665212

STOCKTALK

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Technology Stocks : SAP A.G.

SAP 254.41

+1.1%

Nov 11 3:59 PM EST

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To: Jay8088 who wrote (2457)	9/3/1998 3:32:00 PM
From: growthvalue	Read Replies (1) of 3424

I think the suggestion was that stocks do not have a causal effect on the economy (which isn't entirely true - strong equity markets lead to consumer confidence leads to consumer spending), but rather that the economy has an effect on stocks. Although you are correct that stocks anticipate the economy, except for the influence I mentioned, it doesn't cause the economy to behave in a certain way. It is the outlook for the economy that influences stock fluctuations (in addition to individual business performance which is itself affected by the economy). And the outlook for the economy is derived from how the economy is actually performing. So in the end, I'd say the headline is sorta correct. Stocks are really an indicator of how the economy is expected to do. As a result they are lead by the economy to the extent thatwhen there are surprises in the economy that differ from the consensus outlook, stocks are affected. To put it more simply, the value of stocks is dependent on economic variables, or the anticipation of those variables. Economic variables, on the other hand, are largely independent of stock values.

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