Understanding the Pandemic Stock Market

The worse economic fundamentals and forecasts become, the more mysterious stock-market outcomes in the US appear. At a time when genuine news suggests that equity prices should be tanking, not hitting record highs, explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics can shed some light.

Read more

Why We Can’t Foresee the Pandemic’s Long-Term Effects

Longer-term analyses of the coronavirus pandemic emphasize that there is a good chance that it will fade within a year or two, especially if a vaccine or effective treatment appears.

I hope that’s true. But even if it is, I’m worried that the economy may not return to normal within that time frame.

Big events like a pandemic have the potential to leave behind a trail of disruption. They can create social discord, reduce people’s willingness to spend and take risks, destroy business momentum and shake confidence in the value of investments.

Read more

Predictions for the Coronavirus Stock Market

One prediction seems solid: The coronavirus epidemic will get much worse in the United States in coming weeks. But where the stock market is heading is much less certain.

It is too simple to assume that with its steep decline, the market has already discounted epidemiologists’ forecasts for Covid-19. By this logic, the stock market would fall further only if the virus turns out to be worse than forecast.

Read more

The Two Pandemics

Predicting the stock market at a time like this is hard. To do so well, we would have to predict the direct effects on the economy of the COVID-19 pandemic, as well as all the real and psychological effects of the pandemic of financial anxiety. The two are different, but inseparable.

Read more

Now Available: Narrative Economics

From Nobel Prize–winning economist and New York Times bestselling author Robert Shiller, a new way to think about how popular stories help drive economic events

In a world in which internet troll farms attempt to influence foreign elections, can we afford to ignore the power of viral stories to affect economies? In this groundbreaking book, Nobel Prize–winning economist and New York Times bestselling author Robert Shiller offers a new way to think about the economy and economic change. Using a rich array of historical examples and data, Shiller argues that studying popular stories that affect individual and collective economic behavior—what he calls "narrative economics"—has the potential to vastly improve our ability to predict, prepare for, and lessen the damage of financial crises, recessions, depressions, and other major economic events.

Spread through the public in the form of popular stories, ideas can go viral and move markets—whether it's the belief that tech stocks can only go up, that housing prices never fall, or that some firms are too big to fail. Whether true or false, stories like these—transmitted by word of mouth, by the news media, and increasingly by social media—drive the economy by driving our decisions about how and where to invest, how much to spend and save, and more. But despite the obvious importance of such stories, most economists have paid little attention to them. Narrative Economics sets out to change that by laying the foundation for a way of understanding how stories help propel economic events that have had led to war, mass unemployment, and increased inequality.

The stories people tell—about economic confidence or panic, housing booms, the American dream, or Bitcoin—affect economic outcomes. Narrative Economics explains how we can begin to take these stories seriously. It may be Robert Shiller's most important book to date.

Order now

What People Say About the Economy Can Set Off a Recession

When will the next recession arrive?

Economists are evaluating such factors as President Trump’s endlessly shifting tariff policy, the monetary policy of the Federal Reserve and other central banks, and such “leading indicators” as the yields in the bond market.

Read more

The Trump Narrative and the Next Recession

So far, with his flashy lifestyle, the US president has been a resounding inspiration to many consumers and investors. But his personal narrative is unlikely to survive an economic downturn, because people pull back during such periods and reassess their views and the stories they find believable.

Read more