This comparison of 1960 & 1970 to 2022 was first
presented to subscribers & @CMTAssociation Symposium. 2022 is
tracking eerily close to those two bear market years. Today’s mammoth drop, the
worst since 2020, doesn’t alleviate this alarming comparison.
Both 1960 and 1970 hosted recessions and rate increases in
the prior year. Inflation in 1970 was closer to current conditions with CPI peaking
around 6.5% year-over-year. At the end of April 2022 S&P 500 was down 13.3%,
the worst start since 1939. Only 1932 & 1939 were worse. The second worst
start since WWII was 1970.
It would be nice if 2022 played out more like 1960 with milder
losses. Unfortunately, present circumstances are more akin to 1970. 1960 was
also an election year, while 1970 was a midterm year like 2022.
This time is a little different due to covid-disrupted
supply chains and the fallout from Russia’s invasion of Ukraine with soaring
energy and commodity prices. We are not implying the 36% bear market losses
from the 1968 top to the 1970 bottom are in the cards, but we suspect that we
have not found bottom just yet.
However, it is becoming increasingly likely we get a bottom
sooner rather than later as we did in May 1970 with the Fed raising rates 50
basis points this week and Russia looking to chalk up a victory on WWII Victory
Day celebrated on May 9 in Russia.