Thursday, Jun. 18, 2009
Bear markets
The long boom in stock prices from 1982 to 2000 and the shorter one in housing prices from about 1997 to 2006 were fueled by rising debt. Ever easier mortgage terms and falling interest rates provided a brisk tailwind for home prices. In the stock market, higher profits pushed along by bigger consumer and corporate debt loads brought higher stock prices. Start ratcheting the indebtedness down and throw in slower growth, and both of these processes go backward. For the long-term health of the economy, that's good — as we've learned, debt-fueled growth is not indefinitely sustainable. It means, though, that both the stock market and the housing market will be confronting headwinds for years to come.