However, even if one is prepared to entertain the possibility that the line of causation runs predominantly from macroeconomic conditions – fundamental macroeconomic stability – to asset price determination, the prospects for the evolution of market prices in the near future are vastly conditional on the nature of the macroeconomic moderation.
6  Stock and Watson (2002), among others, show that the decline in volatility appears in a large number of macroeconomic time series: employment growth, consumption growth, inflation and sectoral output growth, as well as in GDP growth. The decline is not confined to the US economy, but is well visible in a vast array of economies, both industrialised and developing, with few exceptions.