With the Dow’s 8 consecutive day winning streak now over, its a good time to think a bit about the past. If you haven’t figured it out yet, I’m a student of market history. I frequently look to past situations to draw (admittedly imperfect) historical parallels.
To me, the popular 1995 soft landing scenario is hardly parallel for a number of reasons. I beleive the 1972-73 era is a much better parallel in many ways — the massive liquidity injection we’ve seen being the prime difference; the same goes for Doug Kass 1937 comparo.
Check out this chart from the 2005 bidecennial report from the SIA:
Not that what has happened in the past is determinative — too many variables need to line up just so — but it certainly can be instructive about what might happen.
Note to WSJ Graphic Department: Its been my experience that when depicting a longer time period (107 years!), a logarithmic chart is far more effective way to present the information, and avoids that "skyscraper effect."
(Just one man’s opinion, and you know I love your work)
Equity Ownership in America
Securities Industry and Financial Markets Association, 2005
Dow Ends Run at History
Stocks Swing and Miss, And Streak Dies at 8;
Record of 1897 Is Safe
WSJ, April 12, 2007; Page C1