How This Market Recovery Stacks Up: Gold and Inflation

by: TickerSense

Since the economy bottomed in November 2001, the S&P 500 has risen over 12%. This represents the second weakest showing of any four and a half year stretch following the end of a recession since 1960 (even after taking into account the gains the market has had during the third longest rally without a correction ever):

While there have been several theories as to why this period has been weak when compared to others, we thought it would be best to compare not only the market’s performance coming out of a recession, but also look at a variety of market indicators spanning the economy, commodities, market valuation, etc. Therefore over the next several days we plan to highlight these indicators when compared to other recoveries. Today we will start with gold and inflation:

Gold's performance during this economic recovery has been the strongest of any other period for which data is available. This strength has led many to believe that inflation, as it has in the past, would follow gold's lead. However, during this period the CPI has grown at a pace that would be considered low by historical comparisons. Now we know that many will take issue with how the government calculates the CPI, but at the same time its hard to argue that inflation is anywhere near the levels it was in the 1975 period when gold had similar (although not as strong) gains.