Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Tuesday, 9 February 2016

A Comparison of Current US Stock Market Performance to that in 2008 and 2000

A look back at stock market performance in two major bear market years of 2000 & 2008 reveals some interesting findings:

First lets look at the S & P 500 Chart in 2000:

s and p 500 2000

The market dropped 10% to start the year. It proceeded to recover most of its losses by late March failing at prior highs eventually falling over 15% further post August. 

Next lets look at the S & P 500 Chart in 2008:

s and p 500 2008

The market again dropped 10% to start the year. It proceeded to recover most of its losses by early May and then collapsing over 50% into October.

That brings us to Today's market:

s and p 500 2016

We have again dropped 10% to start the year.  If we go by what the market did in 2000 and 2008 we should recover most of these losses by May and then begin a major collapse in the fall ahead of the US elections and into 2017.

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Cash - 40%
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My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.