From the desk of Willie Delwiche.
Earlier this week, I laid out some similarities between now and 2008. From a price, liquidity, breadth and sentiment perspective, the echoes are there.
The comparisons keep popping up.
A couple of days ago, there was a chart showing that the ongoing decline in equity market value (relative to GDP) exceeds any other drawdown in the past 40 years with the exception of what was experienced during the Financial Crisis.
Today, it’s data from Gallup showing economic confidence is at levels only seen in 2008-2009.
I’m not saying that the market and the economy need to follow the course laid out in the wake of the Q4 2007 highs. But the more similarities we see, the more worthy it is of consideration. Put another way, until bulls provide proof that we are not following that path, it would be foolish (and perhaps expensive) to ignore it as a possibility. Don’t discount reality because it doesn’t fit with the narrative.
This reminds me of an experience I had years ago:
The house we were living in at the time had a large oak tree in the middle of the yard. For several years, black raspberry canes would grow around the base of this oak tree. I would cut them back and dig them out but they kept popping up. That is where they wanted to grow and there didn’t seem to be anything I could do about it. I could keep fighting, but they would keep coming back.
In the end, I accepted that they would be there whether I liked it or not. I stopped pushing my narrative and adapted to reality. I laid down some mulch, gave them room to grow and soon had a fruitful black raspberry thicket.
When things keep popping up – whether it’s economic & market conditions that are similar to the past or black raspberries in our yards – we can ignore and dismiss and hope they go away on their own.
Or, we can pay attention and adapt as best we can.