October 9, 2008
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the stock market and the economy
I know not everyone follows the stock market and the economy, so for those that don’t, we’re in the middle of a historic decline. In the future, people will write books about this time and what went wrong, what could have been done to prevent it, etc etc. I can’t say how bad it will actually get, but so far the signs are it will be pretty bad. This next week, we may see the low for the year in the stock market, but that doesn’t mean it’s time to celebrate. An end of the year rally might still be followed by further decline in 2009 and/or 2010. The fact is, the stock market is a leading indicator of the economy. It tells us what people expect will happen in the future, and since the economy thrives or contracts on people’s expectations (eg if they expect wage increases, they spend more – if they expect to lose their job, they stop buying), then it’s an accurate predictor. The deep pessimism and losses in the market will be reflected in the economy, and by all accounts it won’t be pretty. My advice is to stay safe physically, and remember compassion. We may not be able to prevent the economic downturn, but we can remember to be kind to our neighbor.
