McAlinden Research Partners | JOE MAC's MARKET VIEWPOINT
Thinking About A Real Beauty
Market Viewpoint: August 2014
Back in 1966, economist Paul Samuelson quipped that the Wall Street market indexes had “predicted nine out of the last five recessions! And its mistakes were beauties.” The Noble Prize-winning economist was having fun with the widespread belief that the stock market is a good barometer of the economy -- falling before recessions and rising ahead of new expansions. His point was valid in the period he observed at that time. Even more remarkably, in the subsequent half-century, the pattern has persisted. While the majority of bear markets have signaled an economic slump, a few of them have sounded false alarms.
One of Samuelson’s real “beauties” occurred in 1987, when a startling plunge in share prices shook Wall Street and the world. Following a powerful summer rally that had lifted the indices by more than 20% in less than three months, stock prices plunged 20% in a single day -- now remembered as “Black Monday.”
Lately, I’ve been thinking a lot about that stunning market event, partly because the recent environment is feeling more and more like that fateful summer. Indeed, the parallels are eerie... CONTINUE TO GET THE FULL REPORT