An adage in investing and policymaking circles is the reminder that the markets are not the economy. While the former tracks profits and expectations, the latter busies itself with tangible stuff, from jobs and wages to GDP. Often the two can tell a similar story, but there are also times when they become disjointed, and economic fortunes get tied up with the whims of financial markets.
According to Mark Zandi, Moody’s Analytics’ prominent chief economist, we are now in one of those moments.
“I rarely weigh in on financial markets, as they generally reflect and are broadly consistent with economic conditions. But there are times when I feel markets are overdone and increasingly disconnected from the economy,” Mark Zandi wrote in an X thread Sunday.
The disconnect Zandi is talking about has left many analysts scratching their heads over the past year. While financial markets have performed well, including not only stocks but also commodities such as gold and silver, the economy as a whole seems to be in a bit of a lull, and has flashed more than a few warning signs. As the disconnect grows, propelled by high valuations and rising speculation in financial markets, Zandi cautioned that the real economy could be suffocated.
