Just a small piece of a ginormous jigsaw puzzle…

Sunday, March 28, 2021

Just a small piece of a ginormous jigsaw puzzle…

We’ve been drawing comparisons here and there between the present setup and the 1930s since late 2019. Typically we’ll reference similarities in the overall debt setup. Less so in an equity market context. Nevertheless, while a great depression is highly unlikely to occur anytime soon, there are some similarities worth paying attention to.

One happens to be the fact that, per the first graph below, the past 12-month rate of change for the S&P 500 is like nothing we’ve seen since, yes, the 1930s:

And here’s how the remainder of the 1930s — past that peak you see on the left above — turned out for the index:

Prior to the most recent read, 1983 marked the year with the highest rate of change outside of the 30s. And while the 80s turned out to be a profitable decade for patient (they lived through some huge volatility) investors, the 12 months following that impressive lurch higher were, well, anything but profitable:

The only other point that pierced the white line on that first chart occurred in 1943. Here’s how the 12 months following that peaked turned out:

Flat.

So, is the above, by itself, telling about the odds going forward? No, not at all, necessarily, this is simply us doing what I wrote about yesterday:

“…we must constantly, and painstakingly, crunch the data, study and chart the history, measure the thickness of the ice, take the outside temperature and, when it’s all said and done (which of course it never is), position according to our ever-evolving (along with ever-changing general conditions) risk/reward thesis…”

It’s just one small piece of the ginormous jigsaw puzzle that is the global economy and the financial markets.

Have a wonderful day!
Marty

Marty Mazorra CFP®, ChFC®

Founder & Co-CIO

is the author of "Making Lemonade: A Bright View on Investing, on Financial Markets and on the Economy" and "Leaving Liberty?: Essays on Politics and Free Market Thinking".

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