The stock market may not have reached its bottom. After a sharp two-month rally, that may sound like a crazy thing to say. But history suggests as much.
By Martin Hutchinson, breakingviews.com
Last Updated: 12:33PM BST 12 May 2009
The 57pc fall in the Standard and Poor's 500 Index to its March low was jaw-dropping: larger than the 48pc decline of 1973-74, or the 49pc fall of 2000-02. This downward move was also faster: 17 months compared to 21 and 31 months in the previous two tumbles.
Still, there have been three worse bear markets in big economies. From 1929 to 1932, the US stock market dropped 89pc. UK shares fell 72pc in 32 months in 1972-75. Finally, Tokyo fell 48pc in only nine months in 1989-90, and 64pc over 30 months. It remains 76pc below its December 1989 high.
The drop during the Great Depression may be the most relevant to the current situation. It came after a similar long period of optimism, brought a similar degree of systemic financial distress, and was just about as rapid. There were also some big rallies on the way down.
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Yep, this is what I fear is happening now. They just revised unemployment upwards to 635,000...guess it has not ‘stabailized yet’ whatever that means.