Brad DeLong — Note to Self: America's Equities Are Worth 20% Less than They Were Worth Three Months Ago...

Brad DeLong notes that fundamentals are the same now as three months ago. Arguably, the fundamentals have improved.

So, what's up with the market correction and seemingly near-panic behavior? 

Changing expectations, involving apparently irrational discounting, owing to factors other than the fundamentals of the American economy. Is there anything that accounts for this based on changed conditions internationally or domestically? 

Of course, various cases can be made for big changes in the works or at least in the offing, but markets have ignored similarly threatening conditions in the recent past. 

If the fundamentals remain essentially the same or are improving, the conclusion suggested is psychological rather than real. When the trend changes, uncertainty increases and with uncertainty, fear.

Grasping Reality
Note to Self: America's Equities Are Worth 20% Less than They Were Worth Three Months Ago...
Brad DeLong | Professor of Economics, UCAL Berkeley