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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Greg Jung who wrote (357)	12/4/1998 9:06:00 PM
From: Moominoid	Respond to of 99985

Obviously the two are not remotely related. I would think that at the aggregate level they are though often with a lag and over-under shooting. If more people want to save (and personal savings rates are very low so I find that difficult to believe) then that would depress interest rates and raise bonds. But stock prices would be more complicated because of the earnings side of the equation. In the shorter run, the academic research evidence is that stock prices track analysts expectations pretty well which is what leads to the overshooting. The third complicating factor is the equity risk premium. This may well have fallen in recent years as the "boomers" we keep hearing about decided that stocks were a safer investment than before. But it can just as well go the other way again. David