"Stocks Crash Worst Since 29"
"Sharp New Stock Drop Spurs Worry on Plant and Consumer Spending"
These are not 2022 headlines; these are headlines from 1962.
On December 12th, 1961, the S&P 500 hit a near-term high; 196 days later, on June 26th, the S&P 500 bottomed down 28%. The market rallied through the Summer, rising 13% into August. Then the market traded down 10% into late October before staging a fourth-quarter rally, gaining 18% into year-end.
On January 3rd, 2021, the S&P 500 hit a near-term high; 164 days later, on June 16th, the S&P 500 bottomed down 24%. The market rallied through the Summer, rising 17% into August. The S&P 500 has been trending down since August 16th. Could we be setting up for a fourth-quarter rally paralleling 1962?
In 1962 we were in a conflict with Russia; that was the year of the Cuban Missile Crisis.
1962 was a mid-term election year.
"History doesn't repeat itself, but it often rhymes." - Samuel Clemens
"Past performance does not guarantee future results." – My Compliance Consultant
There are some significant differences between 1962 and 2022. The Fed was not raising interest rates in 1962, and the country was coming out of a recession that ended in 1961, not possibly entering a recession.
Market patterns are interesting and should be considered because human behavior often follows patterns. But people also see ice cream castles in the clouds and people's faces in burnt toast, so giving more weight to market fundamentals is probably prudent.
Notable News this Week
- The Federal Reserve Bank of Atlanta's GDPNowcast for the 3rd quarter was 2.1% in July and has now fallen to 0.5%. An indicator that the economy is slowing.
- FedEx withdrew full-year guidance and issued an earnings warning citing softening global shipping volumes. The transport sector is often an early indicator of economic weakness because they move boxes of stuff.
- Investment bank Jefferies cut its ratings on three paper companies warning there is a "massive inventory glut" in cardboard. Cardboard is used to make boxes that companies put stuff they sell in. Companies that use fewer cardboard boxes are probably selling less or expecting to sell less stuff.