Late-1970s Deja-Vu; Did The Market 'Jump The Shark'?

Tyler Durden's picture

Just when you thought it was safe to get back in the water of shark-infested algos; just as we hit multi-year equity index highs (with the entire interest rate complex devastatingly divergent still - despite very-recent weakness), we thought it might be at least a little instructive to remember what happened in the late 1970s as analog. These 3 simple charts of Consumer Confidence, Capacity Utilization, and Initial Jobless Claims show just what can happen when you think it's all over.

 

While there are many analogs, we find these extremely timely given the somewhat similar underlying conditions that the world faces; to wit: "A Middle East 'tinderbox' that is very susceptible to a food price shock and a likely cause of an Oil price shock (as we saw in 1973-1974 and again in 1978-1979)."

 

Initial Claims - all looking good until 'Oil'...

 

Capacity Utilization peaking out after a sharp drop...

 

and Consumer Confidence 'double-topping'...

 

 

and the S&P 500's moves following the Claims and Confidence moves... -19% and -27%...

 

Charts: Bloomberg

(h/t Citi)