Steadfast FinancesSpooky Similarities Between 1930 & 2010 Stock Market Chartology

Spooky Similarities Between 1930 & 2010 Stock Market

Filed in Economy , Infographics & Chartology , Investing 101 5 comments

Spooky similarities between The Great Depression stock market crash and the current path of The Great Recession stock market crash.

Will we continue on the path that led the correction of 1937 into a collapse in 1938?

This question would be nothing more than a technical curiosity for chartists if it weren’t for alarmingly similar economic backdrops between the two periods.

Mimicry in no way implies causality, but stock markets have a nasty way of repeating themselves over and over again. Whether that’s because of underlying fundamentals or self fulfilling prophesy, is up for debate.

Either way, a chartology gem like this is definitely worth keeping in the back of your mind.

Image Source & Credit:
Wall Street Journal
Why This Isn’t Like 1938—At Least Not Yet
Donald Luskin, chief investment officer at Trend Macrolytics LLC.

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Posted by CJ   @   16 August 2010 5 comments
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5 Comments

Comments
Aug 16, 2010
11:07 am
#1 Evan :

That is a freaking scary coincidence!

Aug 17, 2010
9:35 am
#2 J.M. :

crap … so what should one do, transfer 401k and other investments to “safer” buckets? or ride it out on the market (I’m young, 29)

Aug 17, 2010
9:48 am
#3 Matt SF :

JM,

I’m reluctant to answer that question for obvious reasons.

If you believe the 2010 stock market will play out like the 1930s, then yeah, your best bet would be in “safer” investments. If you don’t believe it or think it’s just a freak similarity, then it’s best to ride it out.

Only problem is that “safer” investments have been very popular lately (US Treasuries, corporate bonds, etc.), and have all the markings of a bubble themselves. If/when economic fundamentals turn positive, or perhaps more correctly, when the market makers regain confidence in the US economy and say We’re Back to Happy Days Again, money managers the world over will scream Sell Bonds and Buy Equities simultaneously.

Therein lies the great dilemma. Aside from knowing something you shouldn’t, or just being really lucky and guessing correctly, diversification is probably your best weapon against the unknown.

Aug 27, 2010
11:01 pm
#4 Ana Garcia :

amazing… but is there anything that can be done to make that change??

Aug 27, 2010
11:15 pm
#5 Matt SF :

Depends on who you ask.

If you ask Washington, Bernanke, Congress, then yes, they can pump money into the economy (e.g. quantitative easing) by selling Treasury Bonds, and reflating the bubble to keep the anvil artificially floating in the sky.

If you ask the more “pragmatic” minded, then no, not really. U.S. consumer simply has too much debt, much more than the 1920s boom that led to the first Great Depression.

Some well known trend callers are actually calling for The Greatest Depression in the near future because the kind of debt we have now (credit card debt, home equity loan debt, student loan debt) didn’t exist in the 20s and 30s. So it will take us years to grow and/or inflate our way out of it.

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