With the FTSE 100 having recently hit a record high, the question arises: should we spend some of our profits? Certainly, history suggests there is a link between stock market movements and consumer spending. There has been a positive correlation between real annual total returns on the All-Share index and changes in real consumer spending in the following 12 months, of 0.24 since 1987. On average, 10 percentage point above-average equity returns lead to consumer spending growth being 0.3 percentage points above average.
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Sustainable growth
Stock markets are betting that US economic growth can be sustained. There is only mixed evidence for this.
Chris Dillow