In addition, consumer sentiment is tied to feelings of financial well-being. Through both of these channels, the so-called wealth effect and the more general influence on consumer sentiment, equity valuations can and do affect consumption and macroeconomic performance. Equity markets are also a significant source of investment capital, and valuations in the stock market are one determinant of the cost of capital for businesses.
Business outlays on structures rose 7 percent in the second quarter, and construction data indicate that the sector expanded further in both July and August. Still, nonresidential structures are notoriously difficult to project with any certainty. Many sectors of the economy wax and wane along with the overall business cycle, but the structures sector tends to follow long cycles of its own.