Assessing Yellen's Warning That Markets Pose a Threat to Economy

February 11, 2016 5:16 AM

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Assessing Yellen's Warning That Markets Pose a Threat to Economy

Investors were pleased Wednesday when Federal Reserve Chair Janet Yellen said weakening stock prices pose a risk to the economy, convinced she won’t rush into more rate hikes. But how should everyone else feel with stocks down 10 percent in a year?

While far from definitive, evidence exists that equity prices hold clues to the economy, either portending or influencing future growth. A study by the research firm CXO Advisory Group LLC in July 2014 found that changes in gross domestic product only “very slightly” forecast the Standard & Poor’s 5...

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