Since the financial market collapse of 2008, we have have experienced a forced, zero interest rate policy from the US Federal Reserve. Ordinarily, cheap money would fuel risk taking that would grow the economy out of the collapse.
What the zero interest rate policy seems to have actually fueled is massive stock market rally. It has inspired companies to borrow money cheaply and buy back stock, bumping up their prices. It has re-inflated the housing market so that real estate prices are once again above a sustainable price level in many markets. This is artificial and unsustainable. In other words, you may be able to finance an overpriced property at extremely low rates of financing, but who can you sell that property to, at a higher price, when financing becomes more expensive? The greater fool theory in full effect.
GDP should matter, just as the force of gravity cannot be denied, and the pendulum must swing. One might reflect upon the possibility that market prices will adjust at some point when the GDP growth finally comes back, and interest rates normalize. If that cannot happen, if growth does not reassert, what does that tell us?
The crash of 2008 helped put President Obama in office. Few will claim he has been a great cheerleader for business people, inspiring them to go risk-on.
Perhaps we can break out of this low GDP environment with a new cheerleader?