Fed economist: Stop relying on stocks for recession signals

NEW YORK: Turbulence in stocks and bonds was part of the Federal Reserve’s calculus for slowing interest rate increases in February. Now an economist with the central bank’s Dallas branch says relying on the equity market for economic signals is a mistake.

Benchmark gauges such as the and 500 Index are such flawed mirrors of the economy that they probably fail as predictors of gross domestic product, according to a new paper by Julieta Yung, an economist in the research department at the Fed Bank of Dallas. Half the components are manufacturers, for one thing, much more than is reflected in GDP.