…is not an indicator of future returns. At least, that’s what they always seem to say. Despite the saying, any decent chartist worth his salt will tell you that it is simply not true; the markets move in complex but discernible patterns. I won’t go into details here, but I want to address the potential magnitude of our current economic situation.
As you are undoubtedly aggressively unaware, this country has had its fair share of economic instability in the past century. Observe:
Those of us who grew up in the eighties and nineties have only ever really known a strong, bullish market. But, as much as we’d all like to think that such markets will last forever, they don’t. In the 20th century, there have been three extended periods of stagnant or bearish markets. Coming after the turn of the century, and surrounding WWI, the markets traded sideways for 18 years, from 1905 to 1923. After a few years of growth, the country was plunged into our infamous Great Depression in 1929, and the markets did not fully recover to previous levels until 1954, a full 25 years later. The third, much like the first, was a 17 year period of mostly sideways movement, starting in 1965.
So what? Well, if you haven’t been living under a rock, you have been thoroughly force-fed the idea that we are experiencing a period of severe economic collapse, not unlike that of the Great Depression. If this is true (which, so far, it is), than history tells us we are in for a very long ride. While the talking heads want to think that everything will be A-okay in a couple years, the brutal truth is that we are unlikely to fully recover in the next decade.
Can we see this chart in log-log? I think the quickening pace of the economy and information systems would make that much more telling of our current situation. Two years from now we might not even recognize our market.