The current market rally of 100% in 102 weeks is highly unusual. How unusual? We’ve only experienced this kind of market performance 3 times in the last 80 years. This chart from The Chartstore shows just how unusual a rally of this magnitude is:
But who cares what the market has done. We want to know where the market is going. Although the sample size is poor it’s useful to gain some perspective from the past.
The 1932-34 rally took the market higher by 140% in one year. Although the market ultimately powered higher in 1935 the 34 market was largely sideways to down.
After the breather in 1934 the market continued its climb. Between 1934 and 1937 the market more than doubled again. Ultimately, the gains were given back as 1937 proved to be a disastrous year for the market. Equities traded sideways for the next 6 years.
The 1952-1956 rally was similar to the 34 rally. The market powered higher in a near straight line over the course of a 95% rally. The market then hit a wall for two years before correcting 15% from its peak and then continuing its bull run. The 50′s ultimately proved to be a stellar year for equities.
The question the reader must then decipher is whether we are in the 50′s or the 30′s? While one was a disaster the other proved to be one of the great decades in investing history….
The difference between the two markets was primarily starting valuation, but also a totally different macro backdrop.
The current market has more in common with 1937: Balance sheet recession + High Valuations.
Reminds me of the call of that long lost indian tribe – ” Where Fagawe?”
Sorry – that should have been: “Where The Fugawe?”
The question the reader must then decipher is whether we are in the 50"²s or the 30"²s? While one was a disaster the other proved to be one of the great decades in investing history"¦.
"You don’t need a weatherman to know which way the wind blows.” "” Bob Dylan
figuring out this wind is a no-brainer.
Notify me of follow-up comments via e-mail
© 2009 pragcap.com · Register for PC
The current market rally of 100% in 102 weeks is highly unusual. How unusual? We’ve only experienced this kind of market performance 3 times in the last 80 years. This chart from The Chartstore shows just how unusual a rally of this magnitude is:
But who cares what the market has done. We want to know where the market is going. Although the sample size is poor it’s useful to gain some perspective from the past.
The 1932-34 rally took the market higher by 140% in one year. Although the market ultimately powered higher in 1935 the 34 market was largely sideways to down.
After the breather in 1934 the market continued its climb. Between 1934 and 1937 the market more than doubled again. Ultimately, the gains were given back as 1937 proved to be a disastrous year for the market. Equities traded sideways for the next 6 years.
The 1952-1956 rally was similar to the 34 rally. The market powered higher in a near straight line over the course of a 95% rally. The market then hit a wall for two years before correcting 15% from its peak and then continuing its bull run. The 50′s ultimately proved to be a stellar year for equities.
The question the reader must then decipher is whether we are in the 50′s or the 30′s? While one was a disaster the other proved to be one of the great decades in investing history….
The difference between the two markets was primarily starting valuation, but also a totally different macro backdrop.
The current market has more in common with 1937: Balance sheet recession + High Valuations.
Reminds me of the call of that long lost indian tribe – ” Where Fagawe?”
Sorry – that should have been: “Where The Fugawe?”
The question the reader must then decipher is whether we are in the 50"²s or the 30"²s? While one was a disaster the other proved to be one of the great decades in investing history"¦.
"You don’t need a weatherman to know which way the wind blows.” "” Bob Dylan
figuring out this wind is a no-brainer.
Notify me of follow-up comments via e-mail
© 2009 pragcap.com · Register for PC
The current market rally of 100% in 102 weeks is highly unusual. How unusual? We’ve only experienced this kind of market performance 3 times in the last 80 years. This chart from The Chartstore shows just how unusual a rally of this magnitude is:
But who cares what the market has done. We want to know where the market is going. Although the sample size is poor it’s useful to gain some perspective from the past.
The 1932-34 rally took the market higher by 140% in one year. Although the market ultimately powered higher in 1935 the 34 market was largely sideways to down.
After the breather in 1934 the market continued its climb. Between 1934 and 1937 the market more than doubled again. Ultimately, the gains were given back as 1937 proved to be a disastrous year for the market. Equities traded sideways for the next 6 years.
The 1952-1956 rally was similar to the 34 rally. The market powered higher in a near straight line over the course of a 95% rally. The market then hit a wall for two years before correcting 15% from its peak and then continuing its bull run. The 50′s ultimately proved to be a stellar year for equities.
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