Picture du Jour: How low can stocks go?

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History and cycles are not perfect predictors, but it’s worthwhile to pay attention to these indicators. One such chart, indicating the cyclical nature of stock markets, comes courtesy of Stifel Nicolaus (via U.S. Global Investors – Weekly Investor Alert). The graph below shows the 10-year rolling return of the S&P Stock Market Composite going back almost two centuries, indicating current performance (inside the circled area) is at low levels only seen during the Great Depression. Food for thought …

Source: U.S. Global Investors – Weekly Investor Alert, August 27, 2010.

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3 comments to Picture du Jour: How low can stocks go?

  • Prieur:

    As a Certified Financial Planner, former CEO of an investment boutique continuing on as a securities expert witness I read your weekly newsletter with great interest. Albert Edwards prognosis in this issue is rather haunting but may very well be on target. Here in the states we’ve got not only an ill-guided economic fiasco going on but we’re terribly lacking in intelligent “core” or centrist politicians to steer the ship out of These perilous waters. How close is the hidden iceberg?

    One question on the above article Prieur: how can you say, “at low levels only seen during the Great Depression.” when it appears to me that the chart has circled areas virtually every year?

    Please keep up your outstanding efforts; I look forward to further editions.

    Best regards,
    Tom Grzymala

  • @ Thomas: Every year is indicated by a small circle. However, it is the large red circle that indicates a level last seen at the time of the Great Depression.

  • GreenAB

    great chart, thank you.

    but imo the absolute level alone makes not that much sense. rather i´d like to see for HOW LONG these extremes persisted.

    some kind of moving average and the long term medium would help to identify overbought/oversold conditions.

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