In response to my previous post about when the recession will end, a reader named Neal wondered aloud if we’re entering a new paradigm — one in which the old economic rules no longer hold.
“We could always say that the market will do this or that based on history. But based on what is going on now and the conditions we are in, is that history valuable?”
While I understand where Neal is coming from, I’m always hesitant to jump on board when people claim that the rules have changed. Remember the late 1990s, when stock prices just keep going up, up, up as we approached the pinnacle of the dot com boom?
The pundits told us that the rules had changed, that the old view of stock valuations no longer held, but… We all know what happened next. The bubble burst and things came crashing back down to Earth. The old rules held.
So, dear readers, what do you think? Given recent events, have the rules changed? Are we witnessing a paradigm shift, or is this just another blip?