As I wrote in my latest column, there seems to have been a sudden upswing in consumer sentiment, which is finally starting to catch up with the reality that inflation has plunged while unemployment has remained low.
The evidence that the stock market affects consumer sentiment rests in part on average statistical relationships; see, for example, this 1999 Federal Reserve analysis. It also rests on a few striking cases. Here's my favorite example, consumer sentiment during 1987-88.
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