Battle of the Rallies: 1983 vs 2009

The Wall Street Journal has an interesting item today comparing the monster rally this year to the 1983 rally that heralded a monster bull market. Unfortunately, the WSJ notes, the differences are bigger than the similarities:

The market is not nearly as cheap now as it was then. When the 1980s bull market began, the S&P 500 was priced at less than 7 times trailing earnings. Even after a 69% rally, that multiple was just 10 times earnings.

The latest rally began with the market at a P/E of 13. The ratio has bloated to nearly 19, compared with its long-term average of 16.

In April 1983, when unemployment was last at 10.2%, it was on its way down. Now it looks like unemployment could rise for months.

And when the 1980s rally began, the Federal Reserve’s key policy interest rate was 11%, meaning it could simply slash rates to get things moving again. Today, the fed-funds target rate is nearly zero.

via Investors Hope It’s a 1983 Flashback – WSJ.com.

The battle of market rallies: 1983 vs 2009

The battle of market rallies: 1983 vs 2009

Chart via wsj.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s