Click for ginormous chart
Source: Merrill Lynch


I love the giant chart above using the overlay of the S&P 500 off the 1942, 1974, and 2009 generational lows as a guide. Its beautiful in its simplicity, and has a little something for everyone.

The bulls get a chart that is bullish longer-term, the bears get a broad overview that shows the risk of sell off/trading range for a few years that will be sure to confuse everyone.

Here’s Suttmeier:

In mid-to-late 2013, this risk coincides with the US equity market moving into the weakest part of the Presidential Cycle. The rally off the 2009 low (thick red line) fits best with the rally off the 1942 low (solid green line). After a 1946 peak, the S&P 500 pulled back before decisively breaking out in 1950.

All good stuff . . . .



Monthly chart portfolio of global markets
Stephen Suttmeier, MacNeil Curry, Jue Xiong
Merrill Lynch, September 10, 2013


Category: Contrary Indicators, Investing, Markets, Sentiment, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “Generational Lows: 1942, 1974 & 2009”

  1. MayorQuimby says:

    Excuse this bearish outburst hahaha but one should also overlay the following:

    • That is a completely different chart — debt over time without equity prices — showing wholly unrelated data.

      What does it mean to markets? At what debt level do equity prices fall or bear market begin? How much debt can a nation assume and what is the impact on earnings?

      The discussion you are attempting to have is wholly different than the one I am having.

      Beware confirmation bias!

    • Frilton Miedman says:

      The elephant hiding in plain sight.

      Without wage growth & improvement in U/E rates in light of technology, baby boomers retiring and globalization’s effects on US labor demand…. I suspect this will boil down to fiscal redistribution/tax policy.

      I think I’ve butted heads with you a few times on the topic.

  2. [...] Three generational market lows compared.  (Big Picture) [...]

  3. Doug of North Texas says:

    I know you would like to see other viewpoints – here is another view.

    If this chart was adjusted for inflation, I would think 1949 would replace 1942 and 1982 would replace 1974. If I had the tools to graph this, I think it might show up. Also 2009 could legitimately replaced by 2008 (November) as these were almost double bottoms, with far greater anxiety in the bond space in late 2008 (see junk bond prices).

    • By starting all 3 at (more or less) the same point, you effectively inflation adjusted this.

      • PeterR says:

        But the three lines do not start at the same point, and the red and green lines are not really all that synchronous.

        Should the green low (is this 1942? — above the double “ll” above Merrill Lynch as the source label at the bottom left) be moved to the left to align with the low in the red and blue lines?

        I agree with the general thesis that the 2009 low could be an important one, as the 2013 action in SPX — taking out the 2000 and 2007 highs — could signal the end of The Big Churn EWT “flat” since 1997.

        SPX 5000? Especially with Summers at the helm of the Fed?

      • Iamthe50percent says:

        Sorry, but that’s wrong. It would only inflation adjust if all three inflation profiles were the same, but they are not. The enormous 1970′s inflation considerably alters the shape of the curve. I have plots of the DOW, raw and CPI adjusted, that I would be happy to attach if I only knew how.

      • Ok, so we have inflated prices, wages and asset prices, as well as earnings.

        I don’t think inflation adjusting this does anything insightful for the chart . . .

  4. dctodd27 says:

    This chart is just as misleading as those that try to “line up” the charts of 1987 and 2013. First of all, it starts with the assumption that 2009 was a generational low. Secondly, why not compare actual fundamental data from 1942 and 1974 with 2009 rather than just price action? Don’t like Shiller PE? Use price/revenues or dividend yield. The picture doesn’t look quite the same.

    • 1. While you are correct that the author assumed the March 2009 low was a generational one, let me remind you it was almost 10,000 Dow points ago, and that markets have rallied more than a 150% since then; If you have examples of THAT occurring where it WAS NOT a generational low, please bring em.

      2. There are lots of ways to show the market — prices relative to prior cycles is just one way. It shows some things, emphasizes others. Equity price action is merely one way to depict markets.

      I get the sense that by calling this “misleading,” what you mean is its at odds with your current investment posture . . .

      • dctodd27 says:

        If you re-read what I wrote, I said it was “as misleading as” those who start with an opinion in mind and then try to curve-fit the charts to “prove” their point. That’s not analysis, it’s a sales pitch. For the record, I think those who do the same to call for a 1987-sequence market crash are just as ridiculous.

        Also, fair point re: the 150% market advance, but the same can be said for the extraordinarily accommodative monetary policy we’ve seen over the last 5 years. Where else in history can you point to that?

      • Ok, but lets not mince words about your meaning.

        As I have written repeatedly, the Fed’s extraordinary accommodation makes it extremely challenging to do comparisons!

  5. Mr.-Vix-It says:

    This mimics my work very closely. I have us almost at the end of that rally in 1946, we should top out in Q4 followed by a lengthy correction. The correction may or may not take the same sideways shape as in 1947-1949 but the take home message is that we only have a few years to accumulate stock before the market never looks back. I am amazed that so many could be bearish after 13 years of a bear market but I guess that is what it is like at the beginning of a secular bull market. This upcoming bull market will likely be the last bull market for most current investors but too many are going to miss it which is the way it has to be I suppose. Everybody will pile in around 2030-2035 and buy my stock. The market is at all-time highs, we are not Japan people!!!

    • bear_in_mind says:

      TWO market crashes (i.e. 2000, 2008) under a decade + influence of Baby Boomers at or nearing retirement + individuals urged to reduce equity exposure in their 50′s and 60′s + the 25-49 age cohort carrying unprecedented levels of debt (mortgage, education, revolving) + decline in median wages + decline in civilian labor force participation rate = fewer “retail investor” dollars flowing into equities.

      Simply put, you can’t invest what you don’t have. This should change, eventually.

  6. dvdpenn says:

    This also syncs with projections from Hirsch (channeling George Lindsey, he says). It’s what I’m anticipating more or less, as well.

    It also suggests to me same or worse in terms of confrontational politics through 2016 – maybe even a 2-year period in which the Republicans control both houses of Congress. That gives you your move down into a potential low in late 2014-early 2016.

    I don’t see a major stock rally without real inflation. And I don’t see real inflation without more Democrats. So maybe Hilary wins in 2016, Congress goes Democratic on her coattails, and we’re off to the races.