14 February 2024

At the Money: Is War Good for Markets?

1Frameworks

8Insights

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Frameworks in this episode

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War, Inflation, and Technology Super-Boom Model

Identify secular bull markets emerging from conflict, inflation, and innovation

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 2

Myth Buster13:13

The 20% Bear-Market Threshold Is Arbitrary

A decline does not become economically or structurally different merely because it crosses 20%. Ritholtz dismisses the conventional threshold as a poor substitute for examining duration, context, market structure, and the surrounding secular trend.

A numerical threshold does not define the market regime
An 18% decline can resemble a 20% decline
Normal pullbacks can occur during secular advances
Context is more informative than labels

“Net barely down eighteen nineteen seventy eighteen, nineteen point nine. Either way, it's such a normal pullback.”
Barry Ritholtz · 13:13

“The twenty percent number is meaningless.”
Barry Ritholtz · 13:21

#bear markets#drawdowns#market definitions

Myth Buster13:39

Why Secular Market Cycles Do Not Run on an 18-Year Clock

Hirsh rejects the idea that secular bull and bear markets have a fixed duration. World War I, the Depression, World War II, and later economic developments produced cycles of sharply different lengths, while modern technology may compress future cycles further.

Events alter the duration of secular cycles
Historical bull markets have lasted very different lengths
Secular bear markets also vary substantially
Productivity and AI may accelerate economic transitions
Forecasts should use ranges rather than fixed cycle clocks

“So these things aren't necessarily the same timeframe.”
Jeff Hirsh · 14:09

“I think all these cycles have compressed with the productivity, and we're going to get more compression with AI and all the technology.”
Jeff Hirsh · 14:24

#market cycles#technology#ai#forecasting

Hot Take· 1

Hot Take11:24

Why Public Gloom Can Coexist With a Powerful Expansion

Ritholtz argues that negative public sentiment does not necessarily describe the underlying economy or market. Social media incentives, conventional media coverage, and unrepresentative political polling can amplify pessimism even amid fiscal support, technological investment, productivity gains, and healthy corporate balance sheets.

Sentiment and economic conditions can diverge
Social platforms reward negative narratives
Traditional media competes for the same attention
Polling samples may overrepresent unusually dissatisfied groups
Productivity and corporate finances can remain strong despite gloom

“Social media is a cancer. Social media is a cancer on us.”
Barry Ritholtz · 11:31

“people might be unhappy, but you have a massive technological boom, a ton of fiscal spending and an enormous amount of corporate productivity and very…”
Barry Ritholtz · 12:02

#sentiment#media#economy#investor psychology

Explainer· 2

Explainer03:23

Why a 500% Advance Is More Than a Cyclical Rally

Ritholtz and Hirsh distinguish a secular bull market from a shorter cyclical advance occurring inside a longer trend. The distinction changes how investors interpret pullbacks, new highs, and the durability of an expansion.

Secular trends span multiple market cycles
Cyclical rallies can occur inside secular bear markets
A 500% gain represents a structural market advance
Long-term context matters more than a single threshold

“That's more than a rally, that's a full blown bull market, five hundred secular.”
Barry Ritholtz · 03:23

“different than a shorter term cyclical market within a longer term secular.”
Barry Ritholtz · 03:30

#secular markets#bull markets#market cycles

Explainer08:33

How Owner's Equivalent Rent Can Distort the Inflation Picture

The conversation highlights how housing methodology can make official inflation measures behave counterintuitively. Changes in real-estate prices, mortgage rates, and refinancing conditions can affect owner's equivalent rent differently from consumers' direct housing experiences.

Housing has a large influence on CPI
Owner's equivalent rent can move counterintuitively
Low rates and easy mortgages can alter measured housing costs
Headline inflation may obscure underlying components

“there's a crazy thing about owner's equivalent rent that when real estate prices go up, depending on the circumstances, sometimes OEER goes down dramatically”
Barry Ritholtz · 08:33

“Who didn't refinance the US government?”
Barry Ritholtz · 08:46

#inflation#cpi#housing#owners equivalent rent

Story· 1

Story01:03

The Mocked 1976 Forecast That Underestimated the Coming Boom

Yale Hirsh predicted a 500% stock-market advance after the brutal 1973–74 bear market, but the forecast was widely mocked. The market eventually exceeded his target dramatically, with the broader advance reaching roughly 1,000% or more depending on the index and endpoint used.

The forecast began from the December 1974 market low
Hirsh projected a 500% gain over roughly 15 years
The Dow reached his target later than forecast
The S&P 500 achieved the projected gain earlier

“In nineteen seventy six, he predicted a fifteen year super boom, a five hundred percent move in the stock market.”
Barry Ritholtz · 01:11

“At the time, it wasn't especially well received. In fact, it was fairly widely mocked.”
Barry Ritholtz · 01:19

#yale hirsh#market history#forecasting#super boom

Q&A· 1

Q&A12:44

Did the Current Secular Bull Market Begin in 2009, 2013, or 2016?

The speakers disagree with the common assumption that the secular bull market automatically began at the March 2009 low. They consider the 2013 recovery to a prior S&P 500 high and the small 2015–16 bear market as alternative structural starting points.

A market bottom does not automatically start a secular bull market
Recovering a previous long-term high can mark a structural transition
The 2015–16 decline may separate market regimes
Different definitions produce different cycle ages

“But everyone says that on nine was the beginning of the. Of the It's absolutely nottely.”
Barry Ritholtz · 12:52

“Twenty thirteen we said a new high in the SMP going back to a one. That's the start of the new bull market for me.”
Jeff Hirsh · 13:00

#market cycles#s&p 500#bull market#market history

Takeaway· 1

Takeaway14:42

The Peace Dividend Extends Beyond Ending Human Suffering

The episode closes by separating the horrific human cost of war from the economic effects observed after conflicts end. Relief from violence, reconstruction, normalized activity, and renewed confidence have historically supported economic growth and subsequent stock-market gains.

War imposes incalculable human and social costs
The thesis does not celebrate conflict
Ending war removes a major source of suffering and uncertainty
Peace can support economic recovery
Post-conflict periods have sometimes produced strong market gains

“there's an incalculable and terrible cost of war in lost lives and physical and emotional injuries.”
Barry Ritholtz · 14:42

“Peace often leads to strong economic growth and large subsequent gains in stock markets.”
Barry Ritholtz · 15:03

#peace dividend#war#economic growth#stock markets