Hey we're at the bottom; right?

Sunday, March 15, 2009

Not so fast....

Bear Market Rallies

Some people think that stock market rallies only happen in full on bull markets.  That is not the case.  In fact, some of the fiercest short term jumps happen when the economy is in utter disarray.  Let us take a look at the Great Depression for example:

From November of 1929 to September of 1932, the Dow saw 5 rallies over 20+%.  One hit 72% and one hit 48%!  In fact, the 72 percent rally happened right after the market hit the abyss.  Yet as we all know, the Great Depression caused fundamental problems in the economy that lasted the entire 1930s.  So only looking at the stock market as an indicator is problematic.  And keep in mind the rally occurred right on the heels of thousands of bank failures in the 1930s and unemployment spiking to 25%.

Courtesy: Doctorhousingbubble.com