Wednesday, September 17, 2008

Putting the bear market in context

It's been ugly this year, but this chart puts it into a long-term perspective (last data point as of today's close). We've seen a lot worse. And, barring a global catastrophe, stocks are likely to resume their uptrend before too long. The real ugly time to own stocks was in the 1970s. Those were the days of Nixon's dollar devaluation, double-digit inflation, and soaring interest rates. This banking crisis may be unique and painful, but the U.S. and world economies are in better shape today than they were then.

2 comments:

Tom said...

Very true, but there have been ten year periods with little or no return on stock -- the last ten years, for example. If you consider the falling dollar problem, it's much worse. John Hussman claims that, by his measures, this is one of those times when we have to expect the medium term stock returns to be near zero.

Scott Grannis said...

I think there's a chance all the bad stuff begins to reverse. The dollar looks to have bottomed. The real estate crisis is nearing its finale. A rising dollar would be a huge positive.