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Why everything is happening faster in markets now

The stock market's path from mid-2007 through the market hitting new highs in 2013 looks eerily similar to the market's path in 2020. Yahoo Finance's Myles Udland discusses.

Video Transcript

JULIE HYMAN: We have, it's been sort of a cliche during this time that there is lots of changes that have happened in a compressed timeline right now. But usually, Myles, when we're talking about that, we're talking about things in our lives, things in our business. We're not necessarily talking about the markets. But you looked at the markets angle of it in this morning's Yahoo Finance Morning Brief that yes, we've gotten this rebound and the horizon has been much shorter also.

MYLES UDLAND: Yeah, well, this one really was a full hat tip to Sam Rowe. He just made me do the hard part of actually writing all the thoughts down in one place. But friend of the program, friend of all financial journalists, Torsten Slok sent out a chart yesterday showing that the world stock market, market capitalization is back at a record. $95 trillion. You can see the chart right here on the screen. And Sam was like, that chart looks exactly like the market from mid 2007 to 2013 when we hit new highs. And indeed, it is basically the exact same chart. The magnitude from peak to trough in the two declines right around 35% for the S&P.

But everything happened in this crisis so far in nine months, nine and 1/2 months. It took five and 1/2 years, a little bit longer for things to play out back during the financial crisis. And I think what strikes me, and it's a theme that I bring up all the time, because to me, it's the best way to talk about markets now, which is just that everything happens more dramatically and more often. And we can go through instances in recent market history where there were events that later proved to be not so big of a deal that generated 5%, 8%, 12% market reactions just in a couple of days.

I mean, we can go back to late June. I don't even know what everyone was worried about in June, but I know the S&P went down 9% over two trading sessions. I think it was June 10 and June 11. And so there are periods like this. I mean, Julie, I don't know if you were in Davos at the time, but there was the volpocalypse in January of 2018. We had the Dow off 1,200 points twice in four days. And in hindsight, it was because an exchange traded fund with like $100 million under management blew up.

And some people were called off sides with different kinds of complex derivative trades. Point all being, things happen very quickly, very dramatically, and then we go on our way. And I think those two charts side by side, thinking through how the financial crisis played out over many years, this crisis has played out over just a few months, I think should give us maybe a sense of how quickly if, when, hopefully there is a vaccine, how quickly things may go back to whatever it is we hope they go back to in some kind of short order.

BRAIN SOZZI: Yeah, Myles, I think I've had five years worth of burritos in six months, so I get the point. But the premise of your newsletter, do you think there's a potential for a great hangover in 2021, specifically in big tech? All these tech companies, all are claiming that they've seen orders that they would have seen out in the distance, but what does that mean next year? You don't need this tech anymore.

MYLES UDLAND: Well, so I talked to Rich Bernstein, longtime market strategist, I think it was three weeks ago now, and he was talking about how market history, market cycles, the leadership from one cycle never is the leadership in the next cycle. And typically we're talking seven, eight, nine, 10-year cycles here. And his point is basically, tech's been killing it for a decade. Maybe the next decade won't be as good.

I guess to answer your question more directly, Brian, maybe it's that the next cycle happens in two years. Maybe tech gets hit over a two-year period and the next business cycle is a little bit quicker and the next market phase doesn't take that five, seven, 10 years. Maybe it's two or three or four. And so if there is concern about where these companies go, maybe all that's just in a compressed time frame. But we're just kind of working it into one framework here. Anything could happen. But I think discounting the future more aggressively than in the past seems to me, like a feature of the modern market.

JULIE HYMAN: Yeah. And by the way, Myles, I was not in Davos in 2018 January. I was here for volmageddon. And it's also a good reminder, by the way, that markets don't always trade on fundamentals. Sometimes there are these mechanics of the markets that are more powerful, frequently more powerful than things like fundamentals.