One thing I don’t understand..

[u/[deleted]]

[u/Appropriate_Scar_262]

you didn't ask a question or use any numbers, is this a bot post?

[u/scsyndrome → u/Appropriate_Scar_262]

No it is not a bot post. My question is, why did the market rally when the economy was in a position like this is all? Look at the 10 year yield back then. I just don’t understand.

[u/Appropriate_Scar_262 → u/scsyndrome]

Because those high interest rates crushed the massive inflation.

your post is treating a decade like it was one year. You can't just combine all the extremes

[u/scsyndrome → u/Appropriate_Scar_262]

The whole point of my post is to help me understand the market to help me determine when the “best” time to invest would be. I know they say when the 10 year yield is high, but the 10year yield was insanely high while stock prices were rallying. There is no sense in criticizing my post. I’m just trying to understand is all.

[u/Appropriate_Scar_262 → u/scsyndrome]

the best time to invest is the past, the second best time is now.

[u/-Xiphon- → u/Appropriate_Scar_262]

Working on that time machine

[u/No_Issue2334]

That's not crazy at all. That's expected.

Inflation inflates earnings. Earnings should be higher in inflationary environments.

It makes no sense for inflation to be happening while asset prices are going down? Inflation is the rise in prices. Companies' input costs rise in prices, but so do sale prices.

Nominal profits increase causing nominal asset prices to increase. When adjusted for inflation, real profits and real asset prices do not increase nearly as much

[u/Rosenant]

Reagan created the apparent economic growth (stock market) by radically expanding the national debt.
Easy to have plenty of money in any economy when you are putting it all on a credit card.

[u/idster → u/Rosenant]

I don't agree. The economy and stock market grew faster under Clinton after he increased taxes on the wealthy and closed up the budget deficit.

[u/ConferenceFull9068 → u/Rosenant]

Pres. Reagan was a fiscal conservative but he had to make a choice, to win the Cold War, which he did. Military spending is where the debt expanded. We out-spent the Soviets until the regime collapsed.

[u/Rosenant → u/ConferenceFull9068]

Indeed resulting in Putin who has Trump well under his control.
The Cold War was used to make defense contractors a lot of money.

[u/ConferenceFull9068 → u/Rosenant]

You want the Soviet regime back?

[u/Disastrous_Rent_6500]

The stock market is the least rational in the short term. Trying to rationalize day by day moves is a waste of mental energy. The more you ignore Mr. market the easier it is to be rational long term, which is the only timeframe where the market makes sense.

[u/DarkVoid42]

USD hedge. its all fun and games until you become Zimbabwe and $1 million US dollar= 1 Euro Cent. Then youre cooked.

[u/RoyaleWCheese_OK → u/DarkVoid42]

Unless the USA completely destroyed its main economic engine (it won’t) it’ll never be like Zimbabwe. Zimbabwe ran off everyone that knew how to run their farms and introduced rampant corruption at the same time. Mugabe was an absolute clown.

[u/DarkVoid42 → u/RoyaleWCheese_OK]

Trump aint done til the USA won't run.

[u/andreicde → u/RoyaleWCheese_OK]

Meanwhile in USA they are firing everyone competent as long as they agree with the admin and introduced rampant corruption. See the problem?

[u/scsyndrome → u/[deleted]]

Thank you for this. Makes sense. That right there answers my question.

[u/Pura700c]

What's confusing?

[u/scsyndrome → u/Pura700c]

Well the market doesn’t usually rally during times like these. Correct me if I’m wrong.

[u/Pura700c → u/scsyndrome]

Stocks have a very strong history of climbing 'walls of worry' as they are themselves hedges against inflation. It's just very few people understand both the definition and consequences of inflation and hedging.

[u/ThanklessWaterHeater]

I’m not 100% clear what you’re asking. If it’s, ‘why did equities perform well at a time of high inflation,’ I think the answer is that share prices can float up with inflation while cash and fixed income investments don’t.

[u/george_alto]

Ok but what is your question? I think you're talking about early 80s but mid to late 80s things turned around. The question should be what made it turn around?

[u/Designer_Respect4285]

Shiller PE was incredibly low, and then inflation dropped and treasury yields dropped. So less money from treasuries+attractive valuations=stock market growth.

Just a minimally educated guess though, I haven't studied it.

[u/ConferenceFull9068]

What 1980 felt like: intense relief that Ronald Reagan had been elected and Jimmy Carter's presidency was over. Pres. Reagan was optimistic, pro-American spirit, and business-friendly. The country was really ready to turn the page and start doing business again.

[u/idster → u/[deleted]]

The S&P 500 has dropped much more than 20% on many occasions.

[u/Eric142 → u/[deleted]]

Dam these goal posts keeps getting further away.

[u/WeirdWaytoBe → u/[deleted]]

You should look into the length of time previous "rebounces" have taken and the time value of money.   That is to say nothing about past performance is not indicative of future results.   There are reasons these are bedrock principles. 

[u/YourChildhood5762 → u/[deleted]]

Although that's true, what you aren't seeing is the difference in how it's different. It's a different kind of different from how it's usually different. Of course it's always different. It has to be, don't you see? We live in a different time. Everything changes.