S&P 500 Now and '97: Déjà vu All Over Again?

Oct. 10, 2007 4:24 PM ETSPY, IVV5 Comments
Bespoke Investment Group
47.97K Followers

There seem to be endless comparisons between the current market environment and prior periods. Last year, there were several comparisons between now and 1995, a year that also followed an extended period of Fed rate hikes. A few weeks ago as the market seemed to be in a free fall, the two most popular comparisons were 1987 and 1998. Even today, CNBC had a story highlighting that Merrill Lynch compares the current period with 1989 because both periods followed a real estate boom and above average M&A activity.

One comparison we have not seen is now versus the period leading up to the Asia Crisis in 1997. One major similarity between both periods is that the S&P 500 went an extended time without a correction of 10%. Prior to the correction in October 1997, the S&P 500 had gone almost seven years without a decline of 10%. Using intraday prices, during the current period the S&P 500 went nearly five years without a 10% correction.

Below we have overlaid the S&P 500 in the current period on the 1996/1997 price chart using the peak closes prior to each period's 10% correction as the pivot point. As the chart shows, the patterns between the two are very similar. In fact, the correlation between both periods is 0.94.


This article was written by

47.97K Followers
Bespoke Investment Group provides some of the most original content and intuitive thinking on the Street. Founded by Paul Hickey and Justin Walters, formerly of Birinyi Associates and creators of the acclaimed TickerSense blog, Bespoke offers multiple products that allow anyone, from institutions to the most modest investor, to gain the data and knowledge necessary to make intelligent and profitable investment decisions. Along with running their Think B.I.G. finance blog, Bespoke provides timely investment ideas through its Bespoke Premium (https://bespokepremium.com/) subscription service and also manages money (https://bespokepremium.com/mm) for high net worth individuals. Visit: Bespoke Investment Group (https://bespokeinvest.com/)

Recommended For You

Related Stocks

SymbolLast Price% Chg
SPY--
SPDR® S&P 500® ETF
IVV--
iShares Core S&P 500 ETF

Related Analysis