[Mr. Jeeves]

The economy can recover without the stock market participating at all - too many people don't realize that the two are not synonymous. If the Dow returns all the way to the trendline it was on before 1985, it could finally stop dropping at about 600. What will they be saying on CNBC then? LOL!

[eno_]

Ding ding ding! A winner! The real economy can indeed recover even as the stock market returns to normal PE ratios.

Personally I believe PE ratios will stabilize somewhat above the usual 14 or so, but well below where they are now. A few months more bleeding, then a few months of stagnation.

[rohry]

The economy can recover without the stock market participating at all.

In theory it could, but I doubt that it will. Too much consumer and corporate debt, a new bubble in real estate, government spending accelerating and the dollar losing value equals many more months (if not years) of a mushy economy.

[rohry]

If the Dow returns all the way to the trendline it was on before 1985, it could finally stop dropping at about 600.

I think that you meant 6,000, since the Dow was at 2,700 in 1988?

I've been predicting 6,500 for two years now. I think it will get there in the next 9 months...

[Texasforever]

That is a good point. There are many times when the average worker has done much better under a declining market. There are MANY non-market related factors in the economy. The major gains in the market in the last 10 years have come about because of "right-sizing". The only real control over the bottom line within a company are labor costs. However, when those cuts are so severe that a new round of hiring is required just to remain in business, the stock price may well drop but the public gains in new jobs.