One year after we pointed out uncanny similarities between the market with Donald Trump in the White House and the one under John F. Kennedy, the charts are tracking as closely as ever. That could mean good times ahead for bulls.
But not without some more lumps first.
Back in April, the Global Macro Monitor blog, which was the first to draw the comparison, warned in an update that, if the trend in the chart below were to continue, the S&P 500
would soon take a big hit:
It may have taken a bit longer than expected, but the selling sure came, and the charts are now in lockstep. In fact, Wall Street has taken notice.
In a note shared on the Zero Hedge blog over the weekend, Goldman
strategist David Kostin chimed in about how the current retreat, driven by policy concerns, mirrors the “Kennedy Slide” of 1962, which came against the backdrop of the Cuban Missile Crisis, when Kennedy demanded Soviet-leader Nikita Khrushchev remove nuclear-missile installations in Cuba.
Here’s Goldman’s zoomed-in version of the analog:
As you can see, if the charts keep tracking, look for the S&P 500 to drop to a low around 2,300 before building a base and rebounding. Goldman’s base target for 2019 is for the S&P to reach 3,000, which mostly aligns with the comparison.
Read: This chart shows how closely the stock market has echoed a selloff from the 1950s
Global Macro Monitor gave several reasons why the analog works, including geopolitical jitters, extreme valuations, inflation woes, etc. But the blogger pointed to one compelling stat, in particular: The S&P’s big move in a short period of time after each election: JFK — 30.1%, 285 days; Trump — 34.8%, 306 days.”
“Bear markets always follow bull markets and the bigger the prior move in a compressed time frame, the harder the fall,” he said. “Bear markets look for catalysts to sell, but the underlying vulnerability remains — valuation and longer-term overbought conditions.”
At last check, the S&P 500, Dow Jones Industrial Average
and Nasdaq Composite
were all trading lower.
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