I will focus solely on stimulus from US Federal Reserve as our base given it’s role as a global currency.
In 2008, the Economic Stimulus Act came at a cost of $152 billion, providing tax rebates for low-middle class earners along with business incentives.
In 2009, the American Recovery and Reinvestment Act cost $831 billion in order to save jobs and promote new growth via public spending.
By the end of December 2010, $2.8 trillion worth of stimulus had been pumped into the market — including corporate bailouts.
Quantitative easing (bond buying) by US Fed did not end until 2014! Yes, almost four years later.
Here’s what CNN had to say about all this in December 2010:
First, let’s start with the indexes. You’ll notice since the above article (December 2010), both the S&P and TSX have risen, although the TSX index can be described as more of a stagnated rise. The S&P has clearly outperformed due to the size and makeup of stocks (technology focused). Let us turn our focus to Summer 2011.
What happened in August 2011? Debt crisis fears. The world was once again rescued by central banks. Looking at the S&P index, it was after 2011 when the market took off a second time as debt fears were somewhat alleviated.
Now, lets not get things twisted. Debt crises (especially in Europe, eg. Greece, Spain, Italy) brought austerity, poverty, and a reduction in the standard of living for many people. We cannot discount this fact, nor ignore it when looking at the current economic stimulus and global debt that will need to be repaid barring some global debt jubilee. One can see how at some point, debt fears will rear their ugly heads and shock the “froth” markets. Let us see how this played out over the past decade.
Spoiler alert: By 2010 both S&P and TSX had gained significantly from their bottom but were still shy of pre-recession levels. In 2010 there was talk of overvaluation in certain sectors, but still positivity in the news. This continued until 2011, where the aforementioned Debt Crisis “hiccuped” the market. Fear and uncertainty persisted into 2012, but the market continued pushing forward. It is mainly in 2013 where we start to see more talk and certainty about bubbles. Contrast this to today, where the talk of bubbles has come not even one year post-bear market of Spring 2020.
Let’s go for a stroll…
2010: Bull vs. Bear
2011: The Debt Crisis
2012: Continued Uncertainty
2013: To bubble, or not to bubble?
