Bryan Adams, the Canadian singer, famously reminisced about the summer of 1969, and now, investment analysts are as well.
Nikolaos Panigirtzoglou, a strategist at JPMorgan, finds the recession that began in 1969 is the most consistent with the pre-recession stock market pattern of the past year.
Like the one predicted by many economists for this year, the 1969 recession was mild, at least as far as corporate earnings were concerned. Earnings per share for S&P 500 companies fell 13% peak-to-trough during that recession.
Another similarity between now and then is the steep drop in the stock market. In the 1969 recession, the S&P 500 index slumped 34% from peak to trough, and by around 20% before the recession started. Already, the market is down about 20% in the past year from its peak before any recession has started.
The trajectory of the slope of the U.S. Treasury yield curve, as defined by the gap between 2-year and 10-year yields, also is very similar to that of 1969 before the recession started.
So what does this mean?
“Using the 1969 U.S. recession as a guide, the picture we get is of continued equity market declines up to six months after the start of the recession, but a quick recovery after then,” says Panigirtzoglou.