But in the end, I believe the best predictor of the stock market is the stock market itself. And the stock market, moved six months ahead, is, by far, the best predictor of the trend of the economy. The basic function of the stock market is to raise capital for corporations. It's happened before, many times before, and in the end Wall Street has it's own cure. The cure is called a bear market.
Bear markets can take many forms.
Some are minor, some or massive. As a rule, the bigger the speculative bull market, the bigger the corrective bear market that follows. This bear market is being extended greatly by the actions of the Fed. Greenspan is not getting any younger. He's got to be nearing the end of his reign at the Fed, and he doesn't want to go out the door a loser, the Fed Chairman who presided over a recession that the Fed couldn't halt.