Well it’s official. Going by the S&P (which is a far better barometer of the stock market than the Dow) we are in the worst bear market since the Great Depression. (h/t Calculated Risk)
The number by itself is rather trivial, to me what is far more alarming is how quickly it has plunged and how anemic any rebound attempts have been. The crashes of ‘87 and even ‘29 quickly saw large recovery efforts and the fact that the market could not maintain a multi-month long rally from the early October crash shows things are seriously wrong [in fact, by measures of market volatility there is a strong argument that the sustained amount of uncertainty and panic is even greater than any time during the Great Depression]…and those seriously wrong things are showing up in the credit markets. Spreads across all levels of corporate debt compared to treasuries are far higher than any post WWII period, and treasury yields are at record lows. In summary, the market is saying that we are going to have a large and worldwide deflationary spiral. At best we can hope to be like Japan which had the “Lost Decade” now turned to two lost decades (and going by their stock market nearly three lost decades) and realistically Great Depression 2.0 is baked in.
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