I'm confused because the recessions of '81 and '08 (most others ?) were financial market induced and took years for the market (my portfolio) to recover. This time the market recovery took a few months.
Are we not going to have a years-long market correction? I understand that the economy and stock market don't correlate with each other. Is the somewhat self-induced recession to counter the pandemic avoiding a huge market correction, maybe skip a cycle?
FYI, I admit to being very naive about economics.
In those times (1980’s) there wasn’t huge government money dumped in, people mostly had non-stock investment vehicles like pensions and interest was over 10% making stocks less meaningful to individuals, unemployment compensation was much more difficult to receive, nobody unemployed had health insurance or car insurance. For all practical purposes social security disability and workmen’s comp didn’t exist (very high penalty to admission)
Stocks actually trended the economy.
Different world
That said with big gov money dumped in it could result in “recovered losses” being worth less than if we just took the loss.
We are in unprecedented times where the government cash doesn’t create the same level of inflation because it’s dumping lopsidedly into real estate and bank accounts without going through a spending cycle onto “purchases” and is primarily fulfill debt and obligations which delays its effect.
stocks are divorced from the economy (have been for over a decade)
These days the health of a company can easily trend up or down fully independent of its underlying health.
Gains and losses are based on memes and humor, computers do most of the trading with minimal interaction from a human following microtransactions skimming small variances in payout to institutional investors.
For the most part disposable income is dumped into stocks since there is no longer another valid place to put it and oddly that controls inflation since the cash never goes out to spend.
god only knows where this will lead
2008, was a depression not a normal recession, our fundamental error was removing glass segal and a nearly identical (and very predictable) series of events occurred where investors would make their books look good while bankrupting the entity they work for, lots of fake/borrowed money compounding the failure. What was different between 1930 and 2008 was the amount of government involvement, sadly the issues in 2008 were not fully corrected leaving us open to another similar failure and due to the higher gate of entry the failure would be less recoverable since the poor cannot be involved in the recovery.
Only solution is to reinstate glass segal and enforce with imprisonments to bad actors but few are interested in correcting the root of the problem
