The U.S. economy is sending some worrying signals about a possible recession, yet the stock market has gone on a what-me-worry ride toward record heights.
Put simply, while the stock market watches the economy, the two don't always move in lockstep. If investors see that companies are still bringing in profits, and stocks don't appear too expensive, they'll risk an investment even if the economy hasn't gotten an all-clear on the recession watch.
But history shows that stocks can keep rising until a few months before a recession officially starts, as they did until October 2007, two months before the Great Recession swamped the economy — and the stock market. S&P 500 index funds have returned more than 20% this year, and the largest bond mutual fund has returned nearly 8% — yet many of those clients think they've lost money this year, Roland said.
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