Market comeback | Greenspan's warning | Where can you find income?
EDITOR'S NOTE
Does the economy drive the stock market or does the stock market drive the economy?
Former Federal Reserve Chairman Alan Greenspan says what happens next to stocks will determine what happens next to the economy.
"Strangely enough, it's going to depend in large part on the stock market," he said on CNBC's "Squawk on the Street" on Wednesday.
The stock market generates a wealth effect that grows the economy, Greenspan explained, adding that every 10 percent rise in the S&P 500 generates a 1 percent improvement in the nation's gross domestic product.
"It's important to recognize that if we get a major stock market adjustment, we are going to feel it in the economy, which has very short lag," the 93-year-old economist said.
Where stocks go from here is anybody's guess. CNBC's Tom Franck compiled forecasts from mainstream strategists for where the S&P 500 will end up this year. His chart shows they're pretty far apart even though there are less than four months left in the year.  On Wednesday, stocks opened strong and the Dow Jones Industrial Average held its gains later in the day.
The day's trading offered a breather from the volatility that has characterized the past several weeks, given trade war uncertainty, a slowing global economy and ominous signs from bond markets.
Whether it's the economy or the stock market determining the direction, both were calm on Wednesday.
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