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the markets are at all time highs Isn't the world economy built on the idea that markets will always go up? Every year should be an all time high, otherwise we

the markets are at all time highs Isn't the world economy built on the idea that markets will always go up? Every year should be an all time high, otherwise we're in recession which is (apparently) tragedy to be avoided at all costs, no?

michalu 7y ago
Yes but in series of "contract" / "expand higher" cycles, and right now we're definitely not in the contraction period.
deleted 7y ago
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AznHisoka 7y ago
Doesn’t Japan serve as a counter argument?
- xboxnolifes 7y ago
  No, it just implies Japan is still in a recession.
  - OnlineGladiator 7y ago
    That's a self-fulfilling prophecy. You're essentially saying "the markets always rise over time" is a fundamental law that cannot be broken, and counterexamples are clearly just temporary recessions (no matter how long the recession). When you take the logic to such extremes, it becomes a meaningless statement. It's literally impossible to disprove this assertion if you just ignore the evidence that says it's not true. Japan is absolutely a counterexample.
ikeboy 7y ago
No. GDP should always be rising. Markets not necessarily so. 1987 saw a massive market crash with no recession.
- ineedasername 7y ago
  If GDP is rising, that should mean output, and therefore sales, and therefore value/marketcap should generally be higher as well. Sure, they don't have to, there are scenarios where they won't, but the two should still be closely correlated over any medium term or longer time span.
ImaCake 7y ago
My problem with "all time highs" and "biggest single day drop" is that, historically, this is true for every latest date. Of course it's an all time high; 2% growth year on year is compound growth on an ever larger pile of capital! Ditto for biggest single day drops, you can't compare raw number drops of a given index today with the 2001 or 2008, there are so many more bits of capital today than 10 years ago. It is less the assumption that the market always goes up (eventually) and more the lack of mathematical comprehension.
PeterisP 7y ago
Recessions are unpleasant, but it's not considered a tragedy that should be avoided at all costs because they're not really considered as avoidable. The 'business cycle' of expansion and contraction is obviously visible in history and has reasonable macroeconomic explanations, and it's expected to continue. People try to predict the timing of it (which is hard because acting on these predictions often alters reality so that they're less likely to come true), and they definitely try to ensure that recessions aren't long and hard and that the economy can recover from them faster, but nobody is saying that they can prevent a recession, and the interventions which can artifically postpone a recession (i.e. postpone a correction of some market) would generally only make the recession much worse when it happens.
BurningFrog 7y ago
The world economy wasn't built. It emerged.
thorwasdfasdf 7y ago
It's not just that it's at all time highs. PE ratios are also at all time highs: that's the Price to earnings ratio. There's a number of indicators right now that are at all time highs like the Warren buffet ratio (GDP/earnings), all pointing saying this market is really expensive. This is the most hated bull market ever. None of the experts are buying heavily into this market (it's all stock buybacks that's driving this market up). So, you can see why everyone is uneasy about these extremely high PE ratios.
- rootusrootus 7y ago
  Since you mention Warren Buffet, I will say that what makes me most nervous about the market is that collectively everyone seems to be concluding that it's overheated. By the time the hordes figure it out, it's already happened.
  - lotsofpulp 7y ago
    Have the hordes figured it out?
  - Clubber 7y ago
    This recession talk seems to be happening suspiciously close to an election year. It's almost as if someone is trying to concoct a self-fulling prophecy.
    - tehlike 7y ago
      This was the case last year too... In 2017 and 18, there was discussions of melt up and then melt down...
- mrep 7y ago
  > PE ratios are also at all time highs: that's the Price to earnings ratio What index are you looking at? SP 500 is at about 23 [0] which while higher than median, is definitely not at all time highs. [0]: https://www.multpl.com/s-p-500-pe-ratio/table/by-month https://www.multpl.com/s-p-500-pe-ratio/table/by-month
tim333 7y ago
>Isn't the world economy built on the idea that markets will always go up? Not really. Recessions are where there is less spending and production, not when the stockmarket goes down. While stockmarkets and property prices and the like to tend to go up and up in nominal terms a lot of that is because of the currency they are denominated in losing value through inflation. If you adjust for that there is much less of an uptrend.

michalu 7y ago

Yes but in series of "contract" / "expand higher" cycles, and right now we're definitely not in the contraction period.

deleted 7y ago

[deleted]

AznHisoka 7y ago

Doesn’t Japan serve as a counter argument?

xboxnolifes 7y ago
No, it just implies Japan is still in a recession.
- OnlineGladiator 7y ago
  That's a self-fulfilling prophecy. You're essentially saying "the markets always rise over time" is a fundamental law that cannot be broken, and counterexamples are clearly just temporary recessions (no matter how long the recession). When you take the logic to such extremes, it becomes a meaningless statement. It's literally impossible to disprove this assertion if you just ignore the evidence that says it's not true. Japan is absolutely a counterexample.

ikeboy 7y ago

No. GDP should always be rising. Markets not necessarily so. 1987 saw a massive market crash with no recession.

ineedasername 7y ago
If GDP is rising, that should mean output, and therefore sales, and therefore value/marketcap should generally be higher as well. Sure, they don't have to, there are scenarios where they won't, but the two should still be closely correlated over any medium term or longer time span.

ImaCake 7y ago

My problem with "all time highs" and "biggest single day drop" is that, historically, this is true for every latest date. Of course it's an all time high; 2% growth year on year is compound growth on an ever larger pile of capital! Ditto for biggest single day drops, you can't compare raw number drops of a given index today with the 2001 or 2008, there are so many more bits of capital today than 10 years ago. It is less the assumption that the market always goes up (eventually) and more the lack of mathematical comprehension.

PeterisP 7y ago

Recessions are unpleasant, but it's not considered a tragedy that should be avoided at all costs because they're not really considered as avoidable. The 'business cycle' of expansion and contraction is obviously visible in history and has reasonable macroeconomic explanations, and it's expected to continue. People try to predict the timing of it (which is hard because acting on these predictions often alters reality so that they're less likely to come true), and they definitely try to ensure that recessions aren't long and hard and that the economy can recover from them faster, but nobody is saying that they can prevent a recession, and the interventions which can artifically postpone a recession (i.e. postpone a correction of some market) would generally only make the recession much worse when it happens.

BurningFrog 7y ago

The world economy wasn't built. It emerged.

thorwasdfasdf 7y ago

It's not just that it's at all time highs. PE ratios are also at all time highs: that's the Price to earnings ratio. There's a number of indicators right now that are at all time highs like the Warren buffet ratio (GDP/earnings), all pointing saying this market is really expensive. This is the most hated bull market ever. None of the experts are buying heavily into this market (it's all stock buybacks that's driving this market up). So, you can see why everyone is uneasy about these extremely high PE ratios.

rootusrootus 7y ago
Since you mention Warren Buffet, I will say that what makes me most nervous about the market is that collectively everyone seems to be concluding that it's overheated. By the time the hordes figure it out, it's already happened.
- lotsofpulp 7y ago
  Have the hordes figured it out?
- Clubber 7y ago
  This recession talk seems to be happening suspiciously close to an election year. It's almost as if someone is trying to concoct a self-fulling prophecy.
  - tehlike 7y ago
    This was the case last year too... In 2017 and 18, there was discussions of melt up and then melt down...
mrep 7y ago
> PE ratios are also at all time highs: that's the Price to earnings ratio What index are you looking at? SP 500 is at about 23 [0] which while higher than median, is definitely not at all time highs. [0]: https://www.multpl.com/s-p-500-pe-ratio/table/by-month https://www.multpl.com/s-p-500-pe-ratio/table/by-month

tim333 7y ago

>Isn't the world economy built on the idea that markets will always go up? Not really. Recessions are where there is less spending and production, not when the stockmarket goes down. While stockmarkets and property prices and the like to tend to go up and up in nominal terms a lot of that is because of the currency they are denominated in losing value through inflation. If you adjust for that there is much less of an uptrend.