I found this article interesting regarding the recent stock market declines. Truth be told, stocks have been overvalued for some time relative to earnings (e.g., see www.multpl.com). Cheap money (low interest rates, federal stimulus, etc.) certainly contributed to the overvaluation. Nevertheless, my favorite part of the article is at the end:
“There is a huge desire, among policymakers and politicians especially, to see changes immediately, but to everyone’s frustration, it will take time to see if the Fed’s medicine is working.
If, in a few months, there are indications that the Fed is succeeding at bringing inflation under control, markets will stabilize. But if it becomes clear the Fed isn’t getting a handle on inflation, all bets are off.”
It is not just policy makers and politicians that want a quick fix. We as a society, as humans, have been conditioned to quick fixes, instant messages, microwaves, etc. Let’s have patience, choose the right actions, and see how this pans out.