Hubris in the financial markets; link to Minsky
Hubris in the financial markets is most apparent when growth is robust and investors ignore the past
If we omit the two-month downturn that accompanied the initial COVID-19 lockdown, it has been more than 16 years since the U.S. economy was last in a recession as designated by the National Bureau of Economic Research — the longest such stretch in U.S. history.
The real question is whether analysts are right that recessions, if not completely a thing of the past, have become so rare that investors no longer need to defend a portfolio against economic growth turning negative for two consecutive quarters.
... all too reminiscent of economist Irving Fisher, who in the fall of 1929 famously declared that “stock prices have reached what looks like a permanently high plateau.”
The October 1929 stock market crash, then the worst in U.S. history, would occur within weeks of his proclamation.
On the other hand, Wall Street’s graveyard is filled with economists who have confidently declared that a recession was certain and imminent.
So I’m not predicting when the next recession will occur; I’m just saying there’ll be one sooner or later. Accordingly, we should pick stocks that are best able to survive an economic downturn.
Mark Hulbert MarketWatch 22 August 2025
Over the past few weeks three experiences have helped clear my mind on this crisis. First, I reread Hyman Minsky’s masterpiece, Stabilizing an Unstable Economy.
What went wrong? The short answer: Minsky was right.
A long period of rapid growth, low inflation, low interest rates and macroeconomic stability bred complacency and increased willingness to take risk.
Is the worst now over? Certainly not
Martin Wolf, Financial Times, September 16 2008
https://englundmacro.blogspot.com/2024/09/martin-wolf-about-gfc-and-minsky.html
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