“the stock market now drives the economy” - investors who believe this would argue that the link between equities and the economy is the (1) wealth effect which the Fed began focusing on under Bernanke, and (2) financial conditions which also became a greater focus under Bernanke due to the impacts of changes in the Fed's balance sheets on treasury yields, corporate bond yields, equities, and other areas of the financial markets. As evidenced above, this is a phenomenon that has been in existence since the GFC and relates to Fed balance sheet policy. I'm a fan of your cyclical economy framework but I don't believe your appreciating the link between equities and the economy being a more modern phenomenon.
“the stock market now drives the economy” - investors who believe this would argue that the link between equities and the economy is the (1) wealth effect which the Fed began focusing on under Bernanke, and (2) financial conditions which also became a greater focus under Bernanke due to the impacts of changes in the Fed's balance sheets on treasury yields, corporate bond yields, equities, and other areas of the financial markets. As evidenced above, this is a phenomenon that has been in existence since the GFC and relates to Fed balance sheet policy. I'm a fan of your cyclical economy framework but I don't believe your appreciating the link between equities and the economy being a more modern phenomenon.
If stock prices rising boots the economy, which then boosts stock prices, what, in your view, breaks this circular loop?