Thursday, February 16, 2012

World at risk of great economic turmoil again

Business Times: Thu, Feb 16
AS global stock markets lurch back and forth on hopes that Greece and other stricken nations will receive adequate bailout funds to keep them going, investors and traders are seeking a historical precedent for reassurance.

Wall Street between 1968 and 1982 is one such example as it was a time of great economic and political instability.

In that period, there were eight bull and bear markets. In the past 12 years since the beginning of the new millennium, investors have experienced very similar gyrations.

Major bull and bear markets from the late nineteen sixties to the early eighties involved market surges of some 60-70 per cent and bear market slumps that were as fearsome as 33-48 per cent.

From 1982 to 2000, investors who held on to their shares did unusually well. The S&P 500 index soared by 1,369 per cent during those eighteen years, boosting the reputation of Warren Buffett and other bulls.

The only significant setback was the crash of 1987, when the market slumped by 33 per cent within a few days, The tech and Internet boom fuelled the final takeoff from 1998 to 2000 which ended in a final splurge of 53 per cent that carried the S&P 500 index to 1,528 points.

Then followed a horrendous bear market and the S&P 500 index slumped by 48 per cent to 801 points in 2003.

With minimal setbacks, shares almost doubled and by October 2007, the S&P 500 index reached an all time peak of 1,562 points before collapsing by 56 per cent to to 683 points early 2009.

In the subsequent rally, the S&P 500 index rallied by 76 per cent and there have been intermittent downs and ups since then. Indeed between 1998 and February this year, there have been nine bull and bear runs of varied extremes...

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