Chart of the Week: The S&P Rhymes



Eerily enough, the trajectory of the S&P 500 since its bottom in early 2009 is almost identical to what unfolded after the market’s bottom in early 2003, even down to the level of the index itself.

In both cases, stocks began a powerful rally in the month of March, soared almost uninterrupted for the next year to a high of around 1200, and then ran into turbulence by the summer of the following year and slipped back below 1100.

The strong resemblance shows up in the US macro-economic environment as well. At this point in the cycle, then as now, payrolls were disappointing and double-dip forecasts were widespread. Back then, the market eventually shrugged off the skeptics and rallied sharply through the end of 2004 and through 2005. Today, the market’s recent strength hints at what could be yet to come.

There are differences, to be sure, particularly when it comes to volatility. The current cycle’s final bear market sell-off was far steeper, the subsequent rally was stronger, and the summer correction was certainly sharper. But the broad contours remain strikingly familiar. As Mark Twain put it, “History does not repeat itself, but it does rhyme.”



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