2009 and 1983 have shared some striking similarities.
Both years had unemployment over 10%, a U.S. economy in recession, and yet experienced spectacular stock rallies.
1983’s rally even presaged a 18-year bull market.
Yet 2009 looks a lot worse than 1983 at the same time, so much so that perhaps the comparison doesn’t hold water.
WSJ: In April 1983, when unemployment was last at 10.2%, it was on its way down. Now it looks like unemployment could rise for months.
And when the 1980s rally began, the Federal Reserve’s key policy interest rate was 11%, meaning it could simply slash rates to get things moving again. Today, the fed-funds target rate is nearly zero.
Baby boomers then in their prime earning and spending years have since lost trillions of dollars in net worth, with uncertain retirement and health benefits.
U.S. consumers in 1983 hadn’t yet embarked on a 20-year debt binge. Household debt was 62% of disposable income, a level that had endured since the 1960s.
That percentage now stands at 122%, even with debt growth stalled for the past two years.
Yet as a counterbalance, we’ve been spared Rod Stewart this year.