The stock market boom, particularly of the five years up to March 2000, fuelled the economic boom and vice versa. Yahoo s revenues rose sharply and this increased the expectations of investors for the whole of the market. So the most important boost to Yahoo s profits was the stock market itself. But now the process is in reverse. Of course, the capitalist optimists remain.
Stock prices have slumped, so now they are cheap, the optimists argue.
Once investors realize that, they will start buying again. The market will rally and confidence will return. It s true that stock prices are down, although they are still way higher than they were in 1995. But profits are also going down. And profit rates have been falling since the end of 1997.