The problem with the 'new normal' meme is that history is against it. Essentially, the argument for a 'new normal' is an argument for 'this time it is different.' And as we all know, 'this time is different,' is a dangerous position to take. Now, I happen to have a lot of sympathies for the argument and think it pretty reasonable (mainly because we're still overlevered and heading into delevering headwinds [higher taxes, lower consumption, structural deficits, structural unemployment, rising rates, etc.]). But, the problem with the new normal (and all the well considered bear cases of the past [and future]) is that they typically discount the resilience and dynamism of the economy. And it is only with the benefit of hindsight, that we see how it was we escaped the myriad of obstacles encountered and imagined. I don't know how we're going to escape the scythe this time around (as I said, I have my doubts), but the trendline of history reveals bumps, large and small, that are overcome in the course of time. Perhaps, this time is different (and we go through a period similar to the 'heisei malaise' or even something resembling the double-dip of The Depression), but it takes a brave person right now to discount all the market factors flashing green:
- Upturn in M&A (indicates pro-cyclical bias and confidence of boards and management),
- Rejuvenation in the IPO market,
- Significant recovery in credit markets,
- A benign bond market and low interest rates,
- Large fiscal stimulus still to come,
- A strong and resilient stock market,
- Increasing confidence among consumers,
- Economy showing rebound,
- Housing moving off the bottom,
- Resolution of healthcare reform,
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