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Sunday, February 20, 2011

Great Depression vs Todays market advance

This week, the stock market achieved over 100% gains from the bottom of the stock market in march 2009, 102 weeks ago. The low was S&P 500 at 666, and this past week the S&P 500 hit 1,344.

The question is, has the market ever achieved such stellar returns in the last 100 years of the US stock market? The answer is yes! Twice before.

The years such dramatic gains you would think would have been the go go 80's, or the Internet boom of 2000. Maybe the end of World War 2 when the European manufacturing was destroyed, and the US enjoyed a manufacturing boom.

Nope, you'd be wrong. The last time the markets returns exceeded 100% in 102 weeks was The Great Depression, in the 1930's.

The years where 1934 and 1937. This factoid is from The Chart Store, from their paid service, so I can't link to the data or charts.

But it makes you think, anything with such stellar gains eventually has a payback. The tremendous gains in the Great Depression did not last, and the market collapsed each time. In 1934 the gain was about 140%, and 1937 about 135%. We are only at 101%, so if history is an indicator, there is some upward advance still possible.

In 1937, the timeline from the bottom to the top, if repeated, means this Friday will be the top. Compared to 1934 there is a few more weeks left.

Will history repeat itself, or is "this time different"?

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