Humphrey and the S&P500

When looking at a long-term chart of the S&P 500 index, we can notice two distinct bumps starting in the late eighties that appear larger than anything in the many decades prior.  Stocks gained strongly, to then loose more than 40% in1987. The markets recovered very quickly, but the 1990 recession took the S&P500 down 80 points to just below 300.

Then things went exponential. The bull market of the 1990s propelled the index to more than four times its value in five years. Of course, that was a bit much, and the index dropped by half in the first two years of the new millennium. Since it was so much fun, we did it again, doubled, but then lost 750 points and in March 2009, the S&P500 stood at 666.

It is these two outsized rises and falls that dominate the many decades of stock market history. You might be wondering about the 1929 crash – yes, that one stands out too, but it took 26 years to make back the losses, so hardly a double hitter. What’s interesting about these two patterns is the size and timing of their occurrence.

If history repeats itself, and adjusting for the time and space continuum, the next time we see such a double bull and bear market, the index will move by more than 5,000 points, and occur within the next 22 years. That might seem scary from where we are now, but then, and again, if historical patterns hold, the S&P 500 is projected to hit 28,104 by 2047.