The wealth effect of financial assets on consumption, in particular of stock prices, is often considered as the source of ups and downs in the real economy. However, from the theoretical point of view, there is little room for a "pure" wealth effect of stock prices since both consumption and stock prices are forward-looking variables. We review historical events, namely the U. S. stock market crushes in 1929 and in 1987, confirm this theoretical prediction. We also consider the relationship between the consumption boom and the stock market boom in the 1990s. The booms in the 1990s are different from historical financial euphoria (including the bubble economy in Japan) since the consumption boom starting early in the 1990s precedes the boom in the financial market in the late 1990s in the timing of the event. Hence, contrary to the popular perception, the stock price increase until around 1997 might not be a bubble, although the further increase in 1998-2000 is difficult to justify by any means.
