Economists are calm, even if equities are not
There are reasons why equity volatility may be ignored in the real world, but economists cannot entirely ignore the moves in financial markets.
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THE start of 2016 has been a turbulent time in the world's equity markets. The world's economies have been far less volatile. Once again, economics and markets seem to be moving in different directions. This divergence may well continue.
The relationship between equities and economies is a lot looser than people think - the Standard & Poor's is not a barometer for the health of the US economy, the Nikkei tells us little about Japan and the FTSE has barely a hint of a British accent. Here are five reasons why equity volatility may well be ignored in the real world:
In the United States, listed companies account for perhaps 15 per cent of economic activity. This matters because a lot of economic growth is coming from small companies at the moment - it is small companies that are behind the momentum of the European and the American economies.
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