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Tuesday, 12 May 2009

Is history repeating itself? A H1N1 Depression-era nosedive

With stocks jumping 35 percent in less than two months, you can't help but ask the question: Is history repeating itself?


AP
Crowds panic in the Wall Street district of Manhattan due to the heavy trading on the stock market in New York City on Oct. 24, 1929.
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Investors who want the stock market to go up had better hope not.

The market's moves after the 1929 market crash serve as a scary template that investors hope the current market won't follow.

At that time, stocks plunged about 48 percent in just two months following the Oct. 29 crash, only to surge 48 percent in the next six months.

But the next two years saw a crushing drop in the Dow Jones industrial average—which at that time was trading off a Sept. 3, 1929 high of 381.17—that saw the index lose 86 percent from the high of the rally.

So could the same thing happen again?

While most market pros believe some snapback from the current rally is probable and even desirable, a return to a Depression-era nosedive in stocks is not.

"I would say at this point it seems unlikely," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "It doesn't look like any of the really bad things out there that exist as potential worries could blow up in our face and cause us to have a very sharp downturn."

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