Quote:
Originally posted by hytem
I'm an investor and was a daily market watcher during this period. The market took a hit when Greenspan said irrational exuberance--and it was shortly before he started raising interest rates--stating he was concerned about inflation--which didn't exist.
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I also, like most people, was an investor and daily watcher during that time period.
Here is the chart of the NASDAQ. I don't see any "hits " of any sizable proportion either in 1996 when Greenspan made his irrational exhuberence speech in Dec of 06....not really until 2000 when the market started to collapse.
If you were a day trader perhaps the smalll downward blips seemed like cliffs, but for the average investor during the 1990's it was all one big upswing. In fact if you got out of the market when Greenspan made his famed IE speech in 1996, you would have lost out big, because the market hasn't dipped below that point in the 10 years since.
I concur that the stock market, like any market is driven by supply and demand. And interest rates factor into that demand by driving a competitive demand for bonds or debt financed investments. However, they are just one factor. Other elements like companies actually delivering earnings weigh even heavier in stock valuation. Unfortunately, most of the earnings of the internet boom didn't pan out and cheap money provided by the Fed wasn't going to change that.
A balanced budget, again, empirically doesn't seem to have played much of a party in any stock market boom of the 20th century.