Disconnect between stock market and economy, OECD warns

In this Jan. 12, 2017, photo, traders work on the Mizuho Americas trading floor in New York. Stocks are opening lower on Wall Street, Monday, March 6, 2017, led by declines in materials companies and banks. (AP Photo/Mark Lennihan)

PARIS — There appears to be a disconnect between the recent surge in stock markets and the global economy's underlying strength, the Organization for Economic Cooperation and Development warned Tuesday.

Many indexes, particularly in the U.S., have rallied over the winter to hit record highs. The OECD noted, however, that expectations for company earnings in the U.S. and Europe have not been revised up on the whole. And growth in consumption and investment is still lagging.

"In financial markets, there are apparent disconnects between the positive assessment of economic prospects reflected in market valuations and forecasts for the real economy," the Paris-based organization said in its latest economic outlook.

The OECD predicts that global economic growth this year will be 3.3 percent and rise to around 3.6 percent in 2018.

However, it warned that the "projected modest upturn" could be derailed by a number of factors, including the possibility of a downturn in markets, greater barriers to trade set up by governments, and uncertainties about the path of interest rates around the world.

It said the global economy remains beset by sub-par growth and high inequality following the financial crisis.

The organization's secretary-general, Angel Gurria, says governments "need to take actions that restore people's confidence while at the same time resisting turning inwards or rolling back many of the advances that have been achieved through greater international cooperation."

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