A Bull's Chart

Over at Bloomberg, their Chart Of The Day is pretty interesting. While some fear the recession is far from over, this graph suggests that we could be at the start of a tremendous bull market -- just like in the 1980s. Here's the chart:

bull chart.PNG

The comparison is impressive. What happened back then? Bloomberg explains:

The CHART OF THE DAY compares the Standard & Poor's 500 Index's advance since March 9, when the benchmark fell to its lowest level in 12 years, with its recovery from a two-year low set on Aug. 12, 1982. The S&P 500 rose 15 percent for all of 1982 and moved higher every year for the rest of the decade.

But don't get too excited. Bloomberg admits, not everyone is convinced:

Laszlo Birinyi, president of Birinyi Associates Inc., also cited 1982 as a reference point for the market's gain. Even so, "a more detailed picture suggests that it is different this time, very different," he wrote in a report dated July 10.

I think that's right. The problem I've always had with stock market analyses that try to do a lot with a picture is that they sometimes fail to consider the bigger picture. Just because there seems to be some similarity in the stock market's movement compared to what it was in the early 1980s, that doesn't mean the future will necessarily be the same.

What other things should be considered? Well, everything. One obvious example: the political climate then was very different. That was a time of decreasing taxes and regulation -- quite the opposite of what Washington has in store for the years to come. Our economy also faces a very different set of challenges now.

I don't mean to discount the chart completely. It could mean something. I just think everyone should remember to view it in a broader context.