There are many remarkable similarities between the 1980–1981 stock market pattern and today. Ronald Reagan was elected in November 1980 amidst a wave of partisan enthusiasm and ushered in a revolution, much like Trump. Reagan entered office with a foreign policy win, which was the release of the American hostages held by Iran. Trump enters office ahead of the Israel-Hamas ceasefire that will see the release of hostages.
The S&P 500 topped out for the market cycle in late November just after Reagan won the election, though the Dow, which was the more widely quoted market index of the day, made a second high in April 1981. The NYSE Advance-Decline Line topped out in September 1980 and telegraphed the market’s technical deterioration.
There are many eerie similarities. Today’s stock market is struggling to regain its highs after a rally after Trump’s electoral win. The Advance-Decline Lines are also weak and technical analysts have expressed concerns about negative breadth divergences. The key difference is the Volcker Fed raised interest rates to punishingly high levels during Reagan’s era, while today’s Fed is pursuing a policy of monetary easing. The 2-year Treasury rate, which is a proxy for Fed Funds expectations, rose steadily and didn’t top out until August 1981.
The S&P 500 topped out for the market cycle in late November just after Reagan won the election, though the Dow, which was the more widely quoted market index of the day, made a second high in April 1981. The NYSE Advance-Decline Line topped out in September 1980 and telegraphed the market’s technical deterioration.
There are many eerie similarities. Today’s stock market is struggling to regain its highs after a rally after Trump’s electoral win. The Advance-Decline Lines are also weak and technical analysts have expressed concerns about negative breadth divergences. The key difference is the Volcker Fed raised interest rates to punishingly high levels during Reagan’s era, while today’s Fed is pursuing a policy of monetary easing. The 2-year Treasury rate, which is a proxy for Fed Funds expectations, rose steadily and didn’t top out until August 1981.
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