The S&P 500: 2013 Versus 1987
The stock market rally has been unrelenting and it is rare to see it continue so long without a correction. The S&P 500 has been up six months in a row without a pullback of 5%. The market is up an impressive 18% year-to-date. In comparison, the average annual gain for the S&P 500 is slightly under 10%.
Some market pundits see the conditions developing for a crash in equities as there appears to be an over-exuberance in chasing stocks up.
In 1987 stocks ran up for about 10 months before experiencing a monumental collapse of over 20% in a single day on October 19, 1987.
In the chart below, the price action in 1987 has been overlaid with this year’s movement. Stocks in 1987 actually started the year out much stronger than this year where they were up over 20% into late March. The market then consolidated from April through the middle of June 1987.
This year’s advance has been much steadier and is about even in percentage terms versus 1987 at this point in time.
As always, it’s difficult to draw a conclusion as to what comes next. In the near future I’ll go back and compare the two time periods from where the main advance began, culminating in a blow-off top 10 months later (middle of November 2012 and January 1987).