The common view seems to be that the weak stock market reflects a weakening economy.

But we think the converse is more likely: the weak stock market is causing the economy to weaken. It is not a surprise that the recent US consumer confidence numbers were so poor; with the stock market having fallen so sharply since late April, they could hardly be otherwise.

Using the outlook for the economy to predict the direction of the stock market, which most appear to do, is to look at things the wrong way round. The stock market's behaviour will predict the economy's future behaviour. The market's decline since late April foreshadowed the soft economic numbers now being reported, just as the market's rally beginning in the spring of 2009 foretold the beginning of the recovery now under way.

Markets are all about expectations and the critical question for investors is always, what is discounted? Are the expectations reflected in market prices too high, or too low? One clue is to look at financial stocks. Financials tend to lead the market, both on the upside and the downside.

They have been market leaders off the bottom in March 2009, and they peaked in 2007 well before the market. They peaked about two weeks before the market in April and have led it down in this correction.

If financials begin to act better, the market should follow; and if they languish, then the market is likely to do no better.

David Fuller's view A hyperbolic headline is perhaps justified, if only to partially counterbalance the irrational pessimism and also gratuitous bearishness emanating from Wall Street in recent months regarding the prospects for corporate America.

Overall, this is a fine column by Bill Miller and many of these themes will be familiar to Fullermoney subscribers.

Regarding banks, today's upward dynamic for the S&P 500 Banks Index (weekly & daily) has stemmed the latest slide and the overall pattern is probably an extended base formation development. Plenty of smaller commercial banks are still going bust due to duff property and credit card loans but for others which have avoided these problems, this is a great time to be in banking due to almost free borrowing from the Fed and an accommodative yield curve.

For performing banks, look to the developing world, including India's Bombay Banks Index (weekly & daily).

Bill Miller's last paragraph explains the headline: "The last time they were this cheap [large-cap stocks] relative to bonds was in 1951."

I think this says more about the overvalued levels of bonds. Nevertheless, US large-cap shares represent reasonable value and their leverage to the global economy should help to maintain rising corporate profits, on average, despite slow economic growth in the USA.