As long as people think the central banls will bail them out they continue to buy. The first truly modern global financial crisis unfolded in the autumn of 1987. That is when October 19th became infamously as “Black Monday. The Dow Jones Industrial Average (DJIA) dropped 22.6 percent in a single trading session. This loss remains the largest one-day stock market decline in history.
Black Monday ushered in a new era of investor confidence in the central bank’s ability to control market downturns. The actions by Fed Chairman Greenspan galvanized the mantras “buy the dip” and “don’t fight the Fed” and powered them to the top of trading lexicons.
The article below argues this has also been a key factor in allowing the stock market to morph into a much larger symbol of the economy than it merits. At some point this will have to end.