[idea] Econometrics

change in gdp == change in consumer spending

gets most of the way there

consumer spending == -effects of inflation - effects recession - effects of higher interest rates

consumer spending == -5% - 5% - 5% == -15%

change in gdp == -15%

change in gdp == change in consumer spending + change in investment + change in government spending

change in gdp == -15% + change in investment + change in goverment spending

change in investment == no change but may move to shorter time horizons

government spending == no change to falling because of inflation pushing up borrowing costs and being inflationary

change in gdp == -15% + 0% + 0% == -15%

3 mos

6 mos

12 mos

24 mos

48 mos

historical sanity check

https://fred.stlouisfed.org/series/GDP

2008 - 2009: -3%

2020 - 2021: - 11%

take overlapping gdp change and stock market periods

2008 - 2009: -38%

2020 - 2021: +16% (money printing + government spending)

2020-2021: -26% (3 mos pandemic)

average: -38% - 26% = -64%/2 = -32%

https://www.macrotrends.net/2324/sp-500-historical-chart-data

gdp falls 15%

stock market (sp 500) falls 32% to 3,261

safety net beneath safety net: these are the local charities that provide aid government does not - already strained, get strained some more

new evidence updates prior probabilities

i.e. continuous not discrete

mental exercise - not investment advice