Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
AMD Ryzen 4900x / 5900x and 4950x / 5950x Zen3 4th Gen IPC and Clock Speed and Core Specs - 14th Aug 20
Stock Market Gap Fills Suggests Market Momentum May Stall - 14th Aug 20
Silver May Be Overextended – But It’s STILL Cheap - 14th Aug 20
A Short Guide To Making Your First Stock Market Investment - 14th Aug 20
Is Tech Reality Affects our Dating Possibilities? - 14th Aug 20
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Similarities To 1973 Stock Market Peak

Stock-Markets / Stock Markets 2013 Jun 22, 2013 - 12:04 PM GMT

By: Sy_Harding

Stock-Markets

In last week’s column I showed charts of how the market has alternated between significant bull and bear markets since the top in 2000, and how Warren Buffett has been right so far in his prediction in November, 1999 that, “Over the next 17 years equities will not perform anything like – anything like - they’ve performed over the last 17 years.”


I noted how the market since 2000 has been in a sideways ‘secular’ bear market that is very similar so far to the last 17-year long secular bear market of 1965-82. The current ‘cyclical’ bull market that began in 2009 has carried the market back up to its previous peaks of 2000 and 2007, and this time exceeded those peaks. That has it looking ominously similar to 1973, when the Dow also returned to its previous two peaks and broke out to a new high.

That had investors in 1973 excited, bullish, and convinced that secular bear was over. But instead, the next cyclical bear market was even worse than the previous two.

I’ve received a lot of messages since asking if conditions might not be quite different now than at that peak in 1973, given the improving economy, ongoing stimulus efforts by global central banks, assurances coming out of Wall Street that the bull market still has years to run, and so on.

So it has been interesting to take another look back at that period.

There are indeed differences between now and 1973, most notable that the 1970’s were a period of extremely high inflation and interest rates, while inflation and interest rates have been extremely low in recent years.

But there were fascinating similarities, not only in the return of bear markets each time the stock market returned to its previous highs, but in the way the political drama played out.

 For instance, it’s said that probably more new regulations were imposed on the economy in Nixon’s first term, which ended in 1972, than in any presidency since the New Deal, particularly related to health care and environmental issues. New bills and regulations included the creation of the Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), the National Oceanic and Atmospheric Administration (NOAA), the 1972 Noise Control Act, the 1972 Marine Mammal Protection Act, the 1973 Endangered Species Act, and the Supplemental Security Income (SSI) Act, providing a guaranteed income for elderly and disabled citizens. The Nixon years also brought large increases in Social Security, Medicare, and Medicaid benefits.

Nixon actually proposed more programs than he was able to get enacted, including a National Health Insurance Partnership Program, expansion of the Food Stamp program, and a Family Assistance Program.

It was also interesting that the economy had stumbled early in Nixon’s first term, but an economic recovery began in 1971 and lasted into the 1972 campaign season, helping Nixon win re-election by a wide margin in 1972.

The stock market rally that accompanied that economic recovery had the Dow 6% above its previous two bull market peaks by 1973. But the economy began to stumble again.

And here’s where we don’t know if the similarities will continue. The stock market topped out in 1973, plunging into another serious bear market, even though the government had introduced expansive fiscal and monetary policies in an effort to re-stimulate the economy.

Then there are the military similarities. As the U.S. currently struggles to extricate itself from the record-long and costly wars in Iraq and Afghanistan, it recalls the similar ongoing struggle in 1972 and 1973 to wind down the then record long and costly Vietnam War.

Even the optimism on Wall Street and in the media was similar, including the reasons for the optimism.

Time magazine, January 8, 1973 (two days before the market tumbled into the serious 1973-74 bear market): “Most Wall Street analysts are convinced the market will continue to climb smartly in 1973. Wall Street sees signs that small investors are beginning to overcome fears instilled by the stock market decline of 1970 and are returning to the market.”

So there are dissimilarities, particularly in area of inflation and interest rates, but the similarities are fascinating.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2013 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules