Wall Street on a trampoline Spectacular ups and downs: Gyrations not an accurate indicator of the economy.

March 13, 1996

WALL STREET is not the economy. Repeat, Wall Street is not the economy.

With the Dow Jones average bouncing around like a kid on a trampoline down Friday 171 points, up Monday 110 points, flattening out yesterday after plunging 95 points around the noon hour the mantra cited above is a good recipe for sanity.

The economy marches to the beat of a thousand drummers as investors, big and little, use everything from corporate analysis to tea leaves to Delphic utterances from the Fed to ascertain where the cacophony is leading.

For ordinary citizens, at least those not playing the markets, what happens day-by-day on Wall Street really has little impact short-term on their private budgets or private lives. Far more important is the availability of jobs, the rate of inflation and the interest charged on their credit cards of variable rate mortgages. Long-term, these factors can be affected and affected substantially by sustained trends in the buying and selling of stocks and bonds. But as a perverse psychology sends the markets up on bad news and down on good news, volatile price movements on Wall Street should be regarded as having no more profundity than a winning or losing streak by the Orioles.

Note the contrast between a bungee-jumping stock market and an economy that is plodding along at a slow-growth, low-inflation pace that is just what the Federal Reserve Board ordered. Yes, there is a lot of uncertainty out there as corporations downsize, job security becomes a thing of the past, global competition throws out new challenges and the federal government fumbles a chance to achieve a balanced budget. But in the aggregate statistics by which nations attempt to measure their performance, the U.S. is doing a lot better than the general babble suggests.

The prudent course is not to be a Pollyanna or a Cassandra, not to fly high or plunge low as the Dow Jones does its daily dance. For Wall Street is not the economy. Wall Street is not the economy. Remember that.

Pub Date: 3/13/96

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