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I'm not hugely familiar with the Dow Jones, S&P, and NASDAQ, but if they took a one-third hit in value, how detrimental would it be to the economy?
Lets assume there wasn't a V-shaped recovery afterwards and that it took several years to recover.
That is pretty much exactly what happened after 2007, except that the decline was greater than 50%.
There is usually going to be a certain level of pain in the economy when the stock market takes a major hit that takes years to recover. It isn’t pretty.
I'm not hugely familiar with the Dow Jones, S&P, and NASDAQ, but if they took a one-third hit in value, how detrimental would it be to the economy?
Lets assume there wasn't a V-shaped recovery afterwards and that it took several years to recover.
Depends on the economy. Unemployment doubles to 6% or higher from 3% now. Probably news media calls it depression. Then you see comparison to 1930's.
For some recession is when other people lose their jobs. Depression is when you lose yours. Maybe it takes time to find new job.
Could have period of high inflation, slow growth.
Dow Jones is a list of 30 "industrial" companies. S&P is a list of 500 companies by market cap. Most of the Dow 30 are in the S&P. NASDAQ is a collection of companies not listed on New York Stock Exchange. So between 3 index you have most of the US public owned companies.
the economy and stock markets are detached from each other .
while 61% own stock
54% of the markets are owned by only 1% of the people .the top 10% owns 89% of the markets
the bottom 50% holds 6/10 of a percent , so less then 1%
we had 20 years of flat markets in the 1960’s and life went on .
odds are money would find its way in to other assets like gold or bonds.
no one can really predict anymore then we can predict an asteroid hitting us and the damage
The economy from around the mid-60s(end of the post-WW2 boom) to the early-80s wasn't good. Life did go on but things didn't get better until the early or mid 80s, though economists say the 80s were a false prosperity (good for relatively few), with the 90s being a true prosperity (good for many more).
I guess the above comment is off topic as it doesn't refer to the market specifically or even generally.
The economy from around the mid-60s(end of the post-WW2 boom) to the early-80s wasn't good. Life did go on but things didn't get better until the early or mid 80s, though economists say the 80s were a false prosperity (good for relatively few), with the 90s being a true prosperity (good for many more).
I guess the above comment is off topic as it doesn't refer to the market specifically or even generally.
The serendipity of timing of stock investments is very important. I was lucky to be able to start in earnest in 1982 when the Reagan recession was coming to a close. In general US stock values then improved along with the general economy.
the economy and stock markets are detached from each other .
while 61% own stock
54% of the markets are owned by only 1% of the people .the top 10% owns 89% of the markets
the bottom 50% holds 6/10 of a percent , so less then 1%
we had 20 years of flat markets in the 1960’s and life went on .
odds are money would find its way in to other assets like gold or bonds.
no one can really predict anymore then we can predict an asteroid hitting us and the damage
The stock market could be a forecast to the future of the economy not matching current economic data. As earnings are often reported from previous quarter and stocks rise and fall based on forecast of previous year or quarter data.
So it may take several quarters for Wall Street to believe if the market is doing good or bad.
markets and growth and corporate profits have never been linked .
as much as we think higher profits lead to higher stock prices it really does not work like that .
markets are based on greed ,fear and perception not the here and now .
gains and corporate profits don't flow together more ofton than not.
in the book a random walk down wall street 548 nyse issues were tracked and analyed over 5 year periods and the results were the performance had no relationship between the technical and fundemental signals and the actual stock performance ..
ned davis research took another look at the relationship and going as far back as 1927 they found when profits rose more than:
20% the s&p returned a mere 1.3% in gains
10 to 20% saw 5.8% in gains
(-10% to + 10% in profits saw a 9.3% jump in gains
The stock market could be a forecast to the future of the economy not matching current economic data. As earnings are often reported from previous quarter and stocks rise and fall based on forecast of previous year or quarter data.
So it may take several quarters for Wall Street to believe if the market is doing good or bad.
A robust and/or improving stock market is somewhat self supporting. We have so many US stock investors in US companies, that those conditions tend to encourage more significant spending (and investing) as their wealth accumulates. As opposed to China where housing has been the dominant investment. So they tend to be discouraged.
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