Fed-friendly feeds: Subtle economic influence of social media
Over time, certain institutions have improved their ability to harness this “madness of men”.
From Jan-22 to Aug-24, the Fed implemented its steepest rate hike since the 1980s, raising rates by 525 bps (compared to 425 bps in 2005-07 and 265 bps in 1992-98). Despite this, the economy remained stable, and the S&P 500 gained over 20%.
In contrast, previous rate hike cycles ended with significant disruptions: GDP contracted by 20% following the 1980s hikes, the late 1990s cycle culminated in the dot-com crash, the 2005-08 cycle triggered the Global Financial Crisis, and the 2016-19 cycle was cut short by COVID-19. The relatively smooth conclusion of this cycle raises the question: why the sudden orderly wind-down this time?
Something has subtly changed at the margins, particularly in how messaging is delivered. More on that shortly, but first, a brief look at the fascinating 1980s cycle.
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