After a slew of earnings warnings from big companies and a general belief that the market is unlikely to race off again in the near future, the stock markets, particularly the technology-heavy Nasdaq, have slumped again. But you'd think that the Great Crash has already taken place by glancing over the headlines of most business news sources. Fact is, in some ways these news organizations are only telling us what we want to believe. The reality is that the U.S. economy is still operating at such a high level of productivity that the Federal Reserve is still looking at inflationary, rather than recessionary, evidence.
Nobody likes to think about depressions when the going is good.
But come a downturn, it is suddenly tops on everyone's mind. When I wrote last month about expanding and deteriorating corporate debt loads being a potential harbinger for the next recession, my e-mail box got lit up, much of if by people who are terrified of where the economy is headed. No, it's not. This is what we expect to hear, because it will match how we feel. Investors are letting the stock market be their master, rather than forcing it to be their servant, as it should be.