Long Term Perspective

There is no question that wealth plays a role in determining consumer spending. During the great bull market of the 1990s, economists regularly commented on the "wealth effect" which caused consumers to outspend their income. This chart depicts annual growth in market wealth defined by funds held in corporate equities and at mutual funds. There are certainly other types of wealth, but this is a close proxy for stock market wealth. Notice that the sum of these funds (coming from the flow of funds report) moves in tandem with the Wilshire 5000, a stock market index that covers the entire U.S. market.

 

 

Short Term Perspective

According to the Wilshire 5000, the broad stock market gained 2.0 percent in November 2014, following a 2.4 percent boost the prior month.