I Love Looking at Charts, They Calm Me Down

They say the economy is not doing well. Even Jerome Powell, head of the Central Bank of America, gave a fiery speech on Christmas Eve:

“I think there is always the possibility that there will be a recession next year [2024], that is a real possibility, regardless of the current state of the economy.”

Only the values of the S&P 500 index indicate the opposite - for the first time since January 2022, the value of shares of the 500 largest companies listed on the US stock exchange is at its peak.

It turns out strangely, the head of the Central Bank of America claims that if inflation or other risks to the US economy grow contrary to expectations, the Federal Reserve will continue to tighten monetary policy.

And this is at a time when the stock market is clearly being pumped up. After all, if there are problems with the economy, then where does the money come from!

Well, let's look back. The stock market crash of 1929 was caused by a series of financial and economic events - overvaluation of stocks, excessive lending, instability of the banking system, reduction in consumer demand, which led to the Great Depression.

In March 2000, America faced the dot-com bubble, which was caused by the revaluation of shares of high-tech companies related to the Internet business. The climax came when the NASDAQ index reached its maximum value during trading and fell by more than one and a half times at closing.

Well, in 2008, the United States finally understood what the crisis in the mortgage lending market was, caused by massive non-payments on high-risk substandard loans. The largest banks and financial institutions suffered enormous losses. This led to a domino effect - bankruptcies and devaluations of national currencies around the world, and a sharp economic decline in most developed countries.

And here we are again at the peak. Many will say that this is normal, the market has its cycles and everything is going well. Maybe you're right.

However, experience suggests that every innovation goes through a test similar to a crisis. It's like a treatment for the body. At the very beginning of the “illness” you can feel quite normal, but then there is a sharp deterioration, after which recovery begins.

#Economy #Inflation #Central Bank #StockMarket #S&P500