Thoughts and musings from my desk to you.

The Role of Misaligned Incentives in Economic Recessions

Fear of recession is causing current turmoil in stock prices. Recessions are often precipitated by an abrupt return to reality, a moment when the market corrects itself after a prolonged period of distorted perceptions and misaligned incentives. Historically, we have witnessed how such misalignments can lead to the mispricing of assets, which can ultimately culminate in significant economic downturns.