Randall Forsyth wrote over the weekend for Barron’s on David Goldman’s recent take on the low stock market volatility, putting it in an historical context. Forsyth drew a stark contrast between the days of Nixon and what we are facing today, using Goldman’s analysis to examine just how little our economy resembles that of the 1970’s.
“Market pundits raised the specter of returning to those dreadful days of 44 years ago, which marked the beginning of the stagflation of the 1970s. For investors, the memory is of an excruciating bear market that turned off an entire generation to stocks until well after the 1980s bull market had lifted off.
“Amid all the allusions to Watergate last week, an examination of history shows the economic and financial backdrop of 1973 is starkly different from now. That doesn’t mean that nothing bad can happen, just that it will be different this time, if it does happen.”
Forsyth ends by highlighting Goldman’s conclusion: “until we invent the next generation of technologies that will displace the existing monopolies, and make a concerted effort to do so, Goldman concludes, ‘the American economy will languish in the sort of stasis that the options markets reflect.’”