The two graphs show that the Wall Street stock market is more concerned with inflation than the business cycle. The stock on share yield reflects the market's appreciation of business cycle risks, and the bond yield (the yield on Government stock) reflects’ the market’s view of inflation risk. Today the market is anticipating further inflation, as the bond yield is as high as it has ever been, and the stock yield is steady. At the height of the 1929 crash it was an entirely different story, as the bond yield was steady and dividend yields fell sharply. The U.S. Central Bank suggests that if the market believed in the bank’s stance, the present picture should be more like that of 1929. It should be noted that the graphs were compiled from the Standard and Poor's composite stock and bond indices — not the Dow Jones.
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Press, 17 April 1982, Page 20
Word Count
144The two graphs show that the Wall Street stock market is more concerned with inflation than the business cycle. The stock on share yield reflects the market's appreciation of business cycle risks, and the bond yield (the yield on Government stock) reflects’ the market’s view of inflation risk. Today the market is anticipating further inflation, as the bond yield is as high as it has ever been, and the stock yield is steady. At the height of the 1929 crash it was an entirely different story, as the bond yield was steady and dividend yields fell sharply. The U.S. Central Bank suggests that if the market believed in the bank’s stance, the present picture should be more like that of 1929. It should be noted that the graphs were compiled from the Standard and Poor's composite stock and bond indices — not the Dow Jones. Press, 17 April 1982, Page 20
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