Is the market in a bubble? Is a stock market crash coming?
The data below represents 2004-2018.
above: Google Trends on "stock market bubble",. you can clearly see in 2013 (red circle) it becomes a hot topic as S&P reached pre recession high. This can be thought of as a "pessimism graph".
above: S&P 500 2004-current, notice the discussion correlates with S&P hitting pre-recession highs.
above: FRED unemployment data shows no signs of weakness.
above: S&P 500 volatility, lowest around 2013.
above: Here's the Google Trends graph for "stock market crash", similar pattern as the "stock market bubble" graph, but delayed.
It may seem silly in hindsight, but to put this in perspective.. in 2013 this is all the information we had:
If we are to learn anything form this, is it to ignore the financial forecasters, doomsday callers and highly opinionated analysts.
Aggregate macroeconomic data is not showing any sings of weakness for previous month. Would be interesting to see sentiment analysis of "stock market bubble is about to burst" discussion around 2013 compared to now. I recall there was a lot of worry back then that market was at all time high. If you recall, around 2013 a lot of investors and analysts were talking about moving to cash positions anticipating recession.
Seems silly in retrospect, that was so long ago. 2013 was year of IPhone 5 and the beginning of Obama's second term.
Seems silly in retrospect, that was so long ago. 2013 was year of IPhone 5 and the beginning of Obama's second term.
The data below represents 2004-2018.
above: Google Trends on "stock market bubble",. you can clearly see in 2013 (red circle) it becomes a hot topic as S&P reached pre recession high. This can be thought of as a "pessimism graph".
above: S&P 500 2004-current, notice the discussion correlates with S&P hitting pre-recession highs.
above: FRED unemployment data shows no signs of weakness.
above: S&P 500 volatility, lowest around 2013.
above: Here's the Google Trends graph for "stock market crash", similar pattern as the "stock market bubble" graph, but delayed.
Conclusion
Interestingly there seems to be no correlation between the discussion about a bubble/crash and the market itself. In fact it seems inverse, market is lowest volatility when discussion and pessimism is peaking. Before 2008 crash, it was a similar pattern, optimism was highest.It may seem silly in hindsight, but to put this in perspective.. in 2013 this is all the information we had:
If we are to learn anything form this, is it to ignore the financial forecasters, doomsday callers and highly opinionated analysts.
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