As we wait and learn how the debt ceiling issues get resolved and look for opportunities in the present pullback, I thought I would share some interesting facts with you about how conditions in the U.S. right now are similar to those in the 1950s. Jeffrey Kleintop, CFA and Chief Market Strategist at LPL Financial gets credit for much of this article.
Happy reading about Happy Days,
There are aspects of this economy that bear striking resemblance to those of 1951.
* Europe is mired in debt.
* Tax receipts amount to 16% of GDP.
* Federal debt as a percent of GDP is north of 80%.
* It is the third year of the Presidential cycle.
* It is two years after the end of a recession.
* The growth rate of corporate earnings is slowing although the earnings themselves have been better than expected, thus far.
* There is fading resolve to fight a foreign war.
* Commodity prices have rebounded powerfully from the lows of the recession.
“Of course, there are lots of differences between now and 60 years ago. As with the 1950s-based sitcom Happy Days, the past looks different when looking back selectively. However, if the pattern holds – and, importantly, the big issues overhanging the market are resolved or deferred – we may be due for a nice stock market rally in the coming months, happy days indeed.” ~Jeffrey Kleintop
The S&P 500 Index rose sharply from February of 1950 through December of 1951. The chart from early 2010 through July is very similar.
Source: LPL Financial, Bloomberg data 7/22/11
The S&P 500 is an unmanaged index which cannot be invested into directly. Past performance is no guarantee of future results.
Until next week,
Susan R. Linkous