The impact of the “Great Recession” of 2008-2009 will linger for years, as consumers have been traumatized by the unexpected downturn, says economist Daniel Yergin.
“People have discovered — or rediscovered — that Wall Street is not a one-way street. Markets can go down as well as up,” writes Yergin in The Financial Times.
“Especially traumatic is the way people found out that the social contract around pensions and retirement funds, promising ever-rising value, is not an enforceable contract they can count on.”
Yergin, the founder of IHS Cambridge Energy Associates and author of a number of business best-sellers, said that the individual investors are now dispirited and feeling a new sense of caution.
“High indebtedness turned the U.S. into a sort of supernova emerging-market nation, fueled by the global savings glut, which made it vulnerable to a super-explosive debt crisis far bigger than the emerging market crisis of the late 1990s,” says Yergin.
“Investor psychology, fed by easy credit, created bubbles in real estate, energy, and other sectors that eventually burst, devastatingly.”
Yergin added that investors’ imaginations about growth potential became fevered during the last few years and falsely inflated.
Other experts agree that there is a new caution underlying the market, even though the Dow has climbed back over 10,000.
The U.S. has experienced something of a “lost decade,” with the stock market now returning to the place it was 10 years ago, according to a report in The Wall Street Journal.
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