Party like it's 1954
After hitting a low in 2009, US equities have recovered and are mirroring a market boom 59 years ago, with bulls expecting a long run
US stocks are trading virtually in lockstep with 1954, the best year for American equity and the time when shares finally recovered all their losses from the Depression.
The Standard & Poor's 500 Index's returns in 2013 are tracking day-to-day price moves in 1954 almost identically, according to data compiled by Bespoke Investment Group and Bloomberg. In no other year are the trading patterns more similar to 2013 since data on the index began 86 years ago.
The correlation coefficient between this year and 1954, when the benchmark gauge rose 45 per cent, is 0.95 out of a maximum of 1.
We’re above the old high … There’s another leg to come in this bull market
American equities this year climbed above the 2007 peak before the global financial crisis, like they did in 1954 when the S&P 500 reached a new high for the first time since 1929. While bearish investors say the correlation is irrelevant, bulls say the index will keep rising the way it did 59 years ago, as investors regain faith in US profits.
"The return of confidence theme is analogous to what was experienced in the '50s," said Jim Russell, a senior equity strategist at US Bank Wealth Management. "We'll never get an all-clear signal, but we got the good enough signal. People feel the crisis environment is behind us."
The S&P 500 fell 1.1 per cent last week to 1,691.75 points, the biggest drop since August, on concern that a political showdown over government spending will hurt economic growth. The index is up 19 per cent this year and has risen 150 per cent since the start of the bull market in March 2009.
