A chart of the S&P 500 Index is looking like an electrocardiogram since the beginning of August, when serious concerns about European debt problems as well as our country's inability (read gridlock in D.C.) to deal with joblessness and lack of capital spending by firms. Oh, and there's a supercommittee of legislators expected to deliver a plan for massive (trillions) federal spending cuts by November's end.
So, when all is in doubt what is an investor to do? For my money, I'm looking back in history to a similar time of tremendous public doubt about government and the future of the financial system. The behavior of investors then is shaping up much like as it is playing out today.
Following the crash of 1932 (2009), stock rebounded sharply over the next few years 1933-1936 (2010-2011). Then there was another pull-back, followed by a slow and steady rise back. But stocks didn't recover to their pre-crash levels for 25 YEARS! Now with new computer-driven trading technology and supposedly smarter traders, I can see that time frame today condensed by more than half. But that still means we have 5-7 years before all the bad news shakes out of the market -- the deleveraging of the global economy is done.
So . . . I'm saying we're not likely to see S&P 1500 for quite a while. It's at 1154 now.
If you look at the chart above, the best point of entry back then was in late 1941 -- after Pearl Harbor when we declared war with Japan. WWII brought on a period of tremendous economic growth and prosperity for our country and investors profited greatly. We may need a similar extreme global event to kickstart our economy again.
I can't envision one yet. I'm still 50% market 50% mattress.
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