In the Panic of 1907, our economy plunged. Steel output -60%, iron -55%, imports -26%, unemployment soared, doors closed, rent wasn& #39;t paid. Economic output cratered for 6 months. GDP down 10% in 1908 but had quarters down 25%. Yet, stocks rose 44% in 1908. https://www.jstor.org/stable/pdf/1882797.pdf">https://www.jstor.org/stable/pd...

and please don& #39;t infer from this that I think stocks are going higher. I have no idea where the market is going. My general point is that this isn& #39;t the first time that stock markets have been hard to reconcile with economic reality. It& #39;s an argument that market timing is hard

Another interesting point about 1907 is JP Morgan acted as the Fed (before the Fed existed) and saved the banking system. This didn& #39;t prevent a bad economy though. But unlike the Fed& #39;s actions in 1930, it prevented a prolonged depression. But pain was everywhere in 1908

The author of the piece I linked to above was perplexed about the stock market& #39;s recovery, just as we are today (myself included). I think the best thing to do is focus on individual valuations. I& #39;ve always felt trying to predict markets is difficult, but this is a great example

This is one more interesting note. In late 1907, economists thought we were headed for a depression, with one firm calling it the worst in US history, and we had very major depressions before that. In 1930, they thought we were on our way to recovery.