The stock market now, after the COVID-19 pandemic, has strong parallels to the environment after World War II.
Then as now, big changes were underfoot. Soldiers returned home, and the fears were that a recession would materialize because of a surge in unemployment.
Don Rissmiller and Brandon Fontaine, analysts at Strategas, ran through a series of Federal Open Market Committee comments made after the war. There was surprise on how resilient the economy was.
The stock market had rallied on optimism after the war, just as it rallied on optimism after the initial days of the pandemic. And then things got choppy.
The S&P 500
SPX
is down about 12% from its closing peak in early 2022, having surged about 75% from its 2020 lows.
In both the initial post-war period, and the current post-pandemic period, industrial production showed little connection to the stock market.
“It took several years of choppy bull and bear markets, but by the late 1940s the U.S. economy had reorganized into a post-war form. Then the stock market and economic data both found firm bottoms and staged sustainable rallies,” they said.
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