In the place between a stable economy and a recession, there can be found a bear market, and in June this year a bear market descended upon us. Investors had been unenthused for a prolonged period of time, selling more stocks than they had bought, and causing the S&P 500 index to plummet by 20% since its record high in January. This negative economic environment has been presaged by high rates of inflation across the US and Europe in response to Russia’s invasion of Ukraine. Reduced energy supplies coupled with sky-high demand has caused prices to rocket and pushed prices across the board to record highs. Mixed in with supply chain disruptions caused by China’s zero covid strategy and the sanctions regime imposed on Russia disrupting access to essential commodities, inflation has soared and caused central banks to hike interest rates to levels not seen since the 2008 financial crash. The severe disruption to economic activity and the incoming pressure on household budgets indicate an incoming recession, indeed the Bank of England announced that it believes the UK is in recession currently. This negative picture discourages investors who elicit sheer horror for the health of the stock market, in which few clouds hold silver linings.
A bull market in a similar sense to the bear, is one in which investors have optimistic sentiment about stocks and prices rise by 20%. Both ‘bears’ and ‘bulls’ portray the energetic, masculine and violent nature of the world economic system. In great behavioural contrast, proverbs are simple, time tested and traditional phrases, originating from common sense or experience. In our bear market economy it can be argued the best things in life are free. The descriptions of bulls and bears to describe the state of the market can obscure how particular economic conditions are actually felt by ordinary people. It’s highly likely that the UK will go through two consecutive quarters of negative GDP growth and this means that the UK will be in recession. The severe disruption that industry has faced and the shaky confidence of investors on the stock market also indicate this. However at the same time, unemployment is at a historic low and the glut of job vacancies seem to have shown little sign of receding since last year. Compare this to the last major recession in 2008, in which unemployment hit 8.7% of the working population to the current rate of unemployment at a mere 3.8%. What’s more, consumers do still seem to be spending, although as we head into a potentially difficult winter this could recede. All these are usually taken to be indicators of a healthy economy, and as such proverbs provide a rest from the erratic melodrama of economics.
Given the concern amongst investors in the economy, the Truss administration has sought to smoothe over concerns, particularly through avoiding to extend a windfall tax on energy companies for fear of alarming them and deterring them from investing in projects in the UK. Lifting the 2019 ban on fracking for shale gas and accelerating other energy sources is seen by the government as a safer alternative for powering Britain’s homes due to the continuing volatility around sky-high natural gas prices. The same prioritising of investors can be seen in the aggressive lighting up of all billboards with Queen Elizabeth II's face, despite her probably never buying shoes from JD sports. Investors being all that glitters is especially concerning considering the dominant role of America. US listed companies comprise 60% of the world stock market, while the US is home to roughly 4.25% of the world’s population. Given this disparity, when bear market conditions descend upon the US, it has serious ramifications for global economy because the behaviour of US investors is often taken as a bellwether for how others around the world should be acting.
Proverbs represent a perceived truth, much more democratic than the S&P 500. Engaging with this form of generational wisdom will encourage our community to grow. We can choose the direction of our culture through our use of language away from some of the technical jargon that characterises the discussion around the economy and can obscure the lived reality of what bear and bull markets actually entail. Millions of new investors were created during the pandemic with the frenzy around GameStop, crypto and the successes of the tech sector. For these people especially, the downfall in stock prices will be felt.