8.3 C
New York
Thursday, March 28, 2024

The Mega-Bear Quartet and L-Shaped "Recoveries"

Courtesy of Doug Short

Note from dshort: I retired this chart series last summer in deference to my prefered inflation-adjusted series that aligns the S&P 500 2000 high with the Nikkei peak in 1989. However, I continue to receive requests for this version.


This chart series overlays the current S&P 500 with the L-shaped “recoveries” after the Dow Crash of 1929, the Nikkei 225 after Japan’s 1989 bubble, and the post Tech Bubble NASDAQ. Click the chart below for a larger version and use the links to see various comparisons.

I’ve also included an updated two-decade inflation-adjusted chart, which gives us a fascinating visualization of the impact of inflation on long-term market prices. The higher the rate of inflation during a bear market, the greater the real decline. Compare, for example, the peak of the Dow rally in year seven with the same peak in the two-decade nominal chart. The difference is the result of deflation during the Great Depression.

It’s rather stunning to see the real (inflation-adjusted) decline of the Nikkei, two decades years after its crash. The recent lows rival the traumatic Dow bottom in 1932, less than 3 years after its peak.

These charts remind us that bear markets can last a long time. And it’s not necessary to go back to the Great Depression for an example.

See also my preferred version, which puts the start of the current secular bear in 2000 with the popping of the Tech Bubble. In inflation-adjusted terms, the S&P 500 reached its all-time high in March 2000. Although the nominal high in October 2007 was higher, the “real” high was not.

Note: These charts are not intended as a forecast but rather as a way to study the today’s market in relation to historic market cycles.

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments

Stay Connected

157,452FansLike
396,312FollowersFollow
2,280SubscribersSubscribe

Latest Articles

0
Would love your thoughts, please comment.x
()
x