Challenges Ahead

The Federal Reserve under Greenspan in the 90's made a fatal mistake.  He signaled the Federal Reserve moved from stability to helping the economy.   Most people see nothing wrong with the Federal Reserve helping the economy.  But in a capitalist society, and wanting to avoid government intervention into the public sector, the Federal Reserve should have maintained its disposition.   Once he lent a helping hand, politicians and the public switched to view the Fed is the driver of the economy.

This lead to politicians not being accountable for the economy, and to point to the Fed.  Stock market, Bond rates, asset processes are suppose to reflect the economy health as signals to politicians.  Then Politicians adjust policy and lead the country forward. 

Leadership is hard, easier to ask someone else to kick the can.  That has landed us to today.
At some point, can kicking won't work.  There IS one exception to this view, if the economic model changes.  AI has the potential to be so impactful the economic rules I am viewing no longer apply.
Until AI has invaded the economy sufficiently, the older economic model is the guide.

There IS the possibility that the can kicking is sufficient to switch to a newer AI economic model, though I give this a low probability mainly due to multi-front resource constraints.

To me, Ray Dalio is the most articulate of the future view excluding AI rewriting the economic model.  And I completely agree we must suffer in the USA and UK economically to force change.  This will happen when the fed tries to kick the can, and it can't.

Great Depression vs Todays market advance

This week, the stock market achieved over 100% gains from the bottom of the stock market in march 2009, 102 weeks ago. The low was S&P 500 at 666, and this past week the S&P 500 hit 1,344.

The question is, has the market ever achieved such stellar returns in the last 100 years of the US stock market? The answer is yes! Twice before.

The years such dramatic gains you would think would have been the go go 80's, or the Internet boom of 2000. Maybe the end of World War 2 when the European manufacturing was destroyed, and the US enjoyed a manufacturing boom.

Nope, you'd be wrong. The last time the markets returns exceeded 100% in 102 weeks was The Great Depression, in the 1930's.

The years where 1934 and 1937. This factoid is from The Chart Store, from their paid service, so I can't link to the data or charts.

But it makes you think, anything with such stellar gains eventually has a payback. The tremendous gains in the Great Depression did not last, and the market collapsed each time. In 1934 the gain was about 140%, and 1937 about 135%. We are only at 101%, so if history is an indicator, there is some upward advance still possible.

In 1937, the timeline from the bottom to the top, if repeated, means this Friday will be the top. Compared to 1934 there is a few more weeks left.

Will history repeat itself, or is "this time different"?