Why do so many people just assume the stock market will eventually recover?
An Anonymous User asked:
Nobody seems to even think of the possibility that the stock market may never reach the levels they were at before the latest crash. Everywhere I read they say that we will definitely recover and the market will go even higher.
Isn’t there at least a possibility that the economy will never recover to where it once was?
It is possible that it will never recover. More likely, many of the companies will go out of business and the survivors and new companies will go up.
Historically it always has.
Sure there’s a possibility it won’t, but if that were the case the US would become like a third world country
Of course there is a possibility, but as long as the economy doesn’t remain stagnant, in decline, or completely busts in the rest of the existence of stocks it will go higher.
Let me ask you two questions: how many recessions/depressions/bear markets have their been? And how many times has the market gone on to make new highs?
The answer to the first is many and to the second there is only one, and that is this bear market, right now. If you asked me in 2003 I would have said the same thing. After the crash of 1987, the same thing. During the great depression, the same thing again.
The question you should be asking yourself is what are the odds that the economy never recovers? That production and consumption never reach the same stages, that companies file for bankruptcy and none ever rise to take their place at the top, that the economy will crumple into a ball of dirt? The chances, my friend, are very small.
The government and financial regulatory agencies are biased in favor of higher stock prices. And one way or another they often try to engineer such an outcome. Recent government bans on short-selling are one such example.
If the stock market and the economy are left entirely to chance without any interference from the government. Then perhaps the chances would be even for the stock market to go up or down.
But since the government and the business community will keep doing their best to help the economy get better and the stock market go up. Chances are very good that eventually they will succeed. And the stock market will go up. Although this might take a long time this time around.
History says otherwise. It’s the timeline that’s uncertain.
Cognitive dissonance. People want to believe the market will recover because it is in their best interest if it does. I’m doing it myself. I’m down 50% yoy, but still haven’t pulled out because it is hard to accept that my wealth has been decimated. Tread carefully when investing in equities. Many of these companies may not exist as we know them in the near future.
nice post. thanks.
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There are some attention-grabbing cut-off dates in this article however I don’t know if I see all of them center to heart. There may be some validity but I’ll take maintain opinion until I look into it further. Good article , thanks and we would like more! Added to FeedBurner as properly
Wow, this is fun to read. Maybe you have considered submitting articles to magazines?