I can’t predict the future, all I can do is tell you what past patterns have been.
Due to the change of psychology from credit-fueled booms to the psychology of thrift and saving reduces the growth of the economy. However, the stock market can take very rapid upward swings when the gloom starts to abate.
We might be nowhere near the bottom. The P/E on the SP500 is very high right now — people look at the approximately 40% drop in the SP500 since last July and say “Surely, stocks MUST be cheap!”
No, not so. While stock prices have certainly fallen hard, earnings have fallen even harder. Unless earnings recover quickly, the SP500 will be falling later on this year. How far, I can’t say. Right now the only thing holding stock valuations up are analysts’ expectations that earnings will recover. Sadly, I don’t think this will the case. Too many equity analysts are still running analysis based on post-WWII recessions. They keep saying “This is the worst since... WWII” or “this is the worst in 50/60/70 years...”
Blah, blah, blah.
THE fundamental difference here is that unlike recessions, which are normal contractions in economic expansion as a normal outcome of the business cycle and a rise in interest rates precipitated by either the bond market or the Fed, this is a debt deflation. Capital is being destroyed, sucked down into black holes on balance sheets.
Thanks for the reminder that it's not all about the price.