From Recession with Love

Financial Markets’ Improper Affection for Economic Downturns

• Author(s): Jan Libich • Published: December 2022
• Pages in paper: 17


This article examines why some conventional finance theory no longer seems to apply in the post-2008 period. It discusses the reasons for financial markets responding to good news about economic fundamentals as if it was bad news. My controversial conjecture is that (as long as inflation is no longer an imminent threat) recession news would be welcomed by the financial markets – boosting equity prices rather than lowering them. I further document the increasingly-important “flight to focal points” phenomenon, offering examples from the meme stocks and cryptocurrency asset classes as well as some predictions going forward.

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