We often get accused of being grave diggers here on FT A-ville. So, at the close of one of the most difficult days for Wall Street in some time (coinciding with the 80th anniversary of the Great Crash of 1929) , let’s try and give US stocks a hand.
Here’s a BarCap chart of the S&P 500 which overlays our experience this year with the performance of stocks back in 1974. Striking, isn’t it? Prices certainly look to have run too far, too fast. A substantial retracement is inevitable before equities can make any further headway:
But wait! Don’t forget all that gorgeous QE. BarCap’s Sreekala Kochugovindan takes up the theme (emphasis ours):
Figure 2 focuses on the recent equity rally and compares it to the rebound of 1974. The similarities appear striking both in terms of the magnitude and speed of recovery. The 1974 experience was followed by a pullback in the region of 14%. However, given the benign backdrop of easy monetary policy, low inflation and strong growth, a 1974-style correction seems unlikely at the present juncture. In this environment, any pullback is likely to be temporary and far less dramatic in scale.
No convinced? Those blip-ish new home non-sales clearly rattled people:
Note this – the VIX, back up above its 50 day moving average, apparently:
Happy 80th Anniversary, 1929 Crash! – The Big Picture
On the 80th anniversary of the Great Crash of 1929… – FT Alphaville
Energy and financials drag Wall St lower – FT