Plain English with Derek Thompson Crypto Crashing, Pandemic Stocks Plunging: The Story Behind January’s Crazy Stock Market
Jan 25, 2022
Morgan Housel, bestselling author of 'The Psychology of Money' and partner at Collaborative Fund, dives deep into the tumultuous stock market landscape. He explores the dramatic rise and fall of Peloton, the emotional underpinnings of crypto volatility, and how historical market crashes mirror today's dynamics. Housel critiques the reliance on narratives over real profits, shedding light on how economic instability has shaped a generation's financial outlook. Join him for insights into the psychology behind investment decisions and the impact of market hype.
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Market Volatility
- 10% S&P 500 declines occur roughly every 11 months historically.
- Larger drops, like 50% in two months for some tech stocks, are less common.
Explaining Market Volatility
- Financial news often presents coincidental events as causal explanations for market movements.
- Consider factors like Fed policy and stock valuations when analyzing market declines.
Impact of Narratives
- Investment valuations are driven by current numbers and future narratives.
- Low interest rates amplify the impact of narratives, leading to inflated valuations.
