The stock market, in many instances, is a TRAILING indicator, not especially good at predicting trends. And the recent policy of the Federal Reserve to prop up the stock averages, dating from the TARP bailouts (which enabled money to be artificially transfused to the stock market), only deferred the inevitable, when again the prices would crash, catastrophically, and finally make real to the investors and the nation at large, just how shaky the economic infrastructure had become.
“Too big to fail”? Who ever came up with that meme? It is not “failure”, it is demolition work, and allowed to proceed along its natural fault lines, the wreckage may cleared away just that much quicker. But no, the “fixers” hastily threw up all sorts of props and braces to keep the few remaining walls from tottering and falling, preserving the facade, but actually also preventing any real reconstruction.
You are correct.
The equities markets are no longer indicators of the health of the economy. They have become nothing more than trailing indicators but not of the economy, of the optimism/pessimism of investors based upon what the Federal Reserve is saying and doing.
I’ve been compiling screen caps of the DJIA spikes and pits with headlines indicating what the Fed may or may not say on a given day, what the Fed says, what actions the Fed takes.
The DJIA in particular is a joke. When “investors” are not buying or selling based upon the diktat from the FR, the algos and HFTs are running wild taking advantage of ZIRP.
And the VIX, by the way, is NOT an indicator of the weakness of the equities markets. The VIX is nothing more than a reverse graph of whatever happens in the equities markets and, as such, has become a trailing indicator of the markets, and really serves no purpose in forecasting volatility. All you have to do is look at the other indices to see where the volatility HAS BEEN.