Thursday, July 15, 2010

Back to The Future: Wall Street 2010 VS 1931

I was thinking yesterday how the markets seem to be mirroring what happened after the October 1929 Wall Street Crash, that is, they crashed then recovered sharply, only to take further dips during the 1930s and actually falling more after the big 1929 fall.

I am not sure whether we are going to see another big fall in markets but there is little positive economic news on the horizon and huge State debt levels ready to make their impact somewhere down the line so there is clearly going to be more stockmarket downside in the coming year.

What I was thinking was someone must have charted any similarities between the DOW circa 1929 - to the early 1930s and the present day DOW and I am discovering as I find the charts whether my thinking has any merit, just as you are now.

A 5 year chart of the DOW from 1928, a year before the 1929 crash (1928 - 1933)

A 5 year chart of the DOW from 2005, 3 years before the 2008 crash (2005-2010)

Notice the big increase in stock prices from both eras after their respective crashes then also notice the further decline after that rally (the 2009 - 2010 stock recovery was much higher than the depression era) and the DOW has taken that dip over the last few months before another rise over the last week or so. Once again a similar pattern emerged circa DOW depression era.

I certainly don't know whether the DOW is going to repeat its 1930s pattern but as I have already pointed out economic conditions are not good and there is all that debt out there.

If you were a betting man you would have to put your money on a rerun.

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