Thursday, September 8, 2011

1970s redux

This is a chart that ran last week in Quick Takes Pro.




Here is a chart of the Dow in the 1970s and start of the 1980s bull market. Using existing data and forecasts
based on the work of George Lindsay, the red lines represent cyclical bull and bear markets with very crude
targets for the rest of the decade. Note there is no collapse to Dow 400 as some might predict.

The similarities to the 1970s are remarkable. Interest rates may be different but the pattern of 18 years of bull
market (secular bull) and 18 years of bear market (secular bear) suggest that this is indeed a possibility for the
stock market now.

3 comments:

Henry said...

Was the contraction in the '70s a credit cycle deflationary contraction? If not, should the comparison not be with the '30s?
Just wondering...

Quick Takes Pro said...

Henry, I agree but I am just looking for chart analogs in the 70s.

Amalan said...

Have you compared the SP500 for both periods? I did some quick and dirty and found:

if we take the bottom to be Dec 1974 and Mar 2009, both happened around 8-9 years from the beginning of the secular bear. Some lines have a second percentage return and time it took - they are from the bottoms (first line):

70s
----
Dec 23, 1974 – 65.96
July 15, 1975 – 95.61 +45% (7.5 mo)
Sep 16, 1975 – 82.09 -14.1% (2 mo)
Sep 21, 1976 – 107.83 +31.4% (12 mo) 63.5% (21.5 mo)
Feb 28, 1978 – 87.04 -19.2% (17 mo) 38.5 mo
Sep 12, 1978 – 106.99 +22.9% (6.5 mo)
Nov 15, 1978 – 92.71 -13.4% (2 mo)
Feb 4, 1980 – 117.95 +27.2% (14.5 mo)
April 21, 1980 – 99.80 -15.4% (2.5 mo)
Nov 28, 1980 – 140.52 +40.8% (7 mo)
Aug 12, 1982 – 102.42 -27.1% (20.5 mo)

'00s
----
Mar 9, 2009 – 676.53
April 23, 2010 – 1217.28 +79.9% (13.5 mo)
July 2, 2010 – 1022.58 -16% (2 mo)
April 29, 2011 – 1363.61 +33.4% (10 mo) 100% (25 mo)
Aug 8, 2011 – 1119.46 -17.9% (3 mo) 28 mo

Seems to be doing similar things in both periods, except the latest decline in 2011 seems to have happened much more quickly compared to the low reached in Feb 1978.

Any thoughts?