Bryan Adams, the Canadian singer, famously reminisced about the summer of 1969, and now, investment analysts are as well.
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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.
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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.