'When a Stock Market Theory Is Contagious'

Robert Shiller's narrative:

When a Stock Market Theory Is Contagious: Since Sept. 18, the stock market has fallen more than 6 percent. An abrupt decline last week — after five years of gains — prompted fears that the market may have reached a major turning point. Has a bear market begun? It’s a great question. ...

Fundamentally, stock markets are driven by popular narratives, which don’t need basis in solid fact. True or not, such stories may be described as “thought viruses.” ... They spread by contagion. ... The most prominent story since the September peak seems to be one of a “global slowdown” with associated “deflation.” Underlying this tale are deeper, longer-term fears. There is a name for these concerns too. It is “secular stagnation”...

Why? It’s probably because Lawrence H. Summers ... used the phrase in a talk he gave on Nov. 8... Paul Krugman wrote approvingly about the talk...

There is little talk about secular stagnation in scholarly circles today. The recent chatter has centered in the news media, in conference panel discussions and in the blogosphere. ...

The current secular-stagnation story is ... so vague, the negative feedback loop can’t be resolved ... neatly. The question may be whether this thought virus mutates into a more psychologically powerful version, one with enough narrative force to create a major bear market.