The 70’s Are Back

by Sam Jones It should be no surprise that the state of our financial and economic worlds are approaching perfect symmetry with the mid 70’s. In 1974, we saw unfathomable federal bailouts, massive bank failures (many more than today), nationalization of the Savings and Loan institutions that were "too big to fail", the final phase of a losing war in Vietnam, historically low interest rates and yes the bottom of a prolonged and painful period in stock market history dating back to 1965. At the depth of despair, we also had Watergate and Nixon’s resignation. The Economist ran a headline in the Fall of 1974, "US Stock Market Going to Hell." Within one week, the markets bottomed and moved higher for 25 years. For this discussion, I want to focus on the period between 1974 and 1982. Financial market academics know this period was one of the very deepest and toughest economic cycles next to the Great Depression in US history. During this period, hopeless indices were created like the Misery Index – which simply added the unemployment rate to the inflation rate. Here’s a list of several major events that marked extremes. Pay special attention to their timing and […]

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