History may not repeat but it often does rhyme



Location: New York
Author: chartoftheday.com
Date: Monday, May 4, 2009


Many investors are looking to the early 1930s for some insight into the current economic/stock market environment.

While there are significant differences (global economy, credit default swaps, TARP, FDIC, etc.) between the current environment and that what occurred in the early 1930s, there are also many similarities (bank failures, bankruptcies, severe market declines, etc.).

After all, history may not repeat but it often does rhyme.

For some perspective on the current stock market rally that began on March 9th, today's chart illustrates the duration (calendar days) and magnitude (percent gain) of all significant Dow rallies that occurred during the 1929-1932 bear market (solid blue dots).

For example, the bear market rally that began in October 1931 lasted 35 calendar days and resulted in a gain of 35%.

As today's chart illustrates, the current Dow rally (hollow blue dot labeled you are here) is slightly below average in both duration and magnitude relative to the average 1929-1932 bear market rally (hollow red dot).

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