Not to overdo it on the stockmarket topic, but this weekend I ran across the following two interesting figures. The first figure shows the average path of 26 market bubbles in developed markets since the 1700s.
What is interesting about the bubble that imploded in early 2000, I think, is how typical it was of prior bubbles (insofar as you can credibly create composites of such things). As a matter of fact, you could legitimately argue that the most recent bubble differed from prior such inflations only in its mildness: earlier bubbles were peakier than this recent one. (To be fair, the graph compares earlier bubbles to the S&P 500 — if we used the Nasdaq Composite you would see that prior bubbles and the recent one tracked better.)
Moving forward, however, one hallmark of prior bubbles is a rocket-ride upward from the trough. Prior bubbles have averaged a 60% run in two-year period starting when the bubble burst. So, how has this one done? Not well.
The bubble of 1997-2000 has lagged prior post-bubble expansions from the get-go, and the gap widens as we get further out. Granted, the deviation of returns also widens the further we get from the average bubble’s end date, but there is no denying we are experiencing a weaker run-up than has typically been the case in such asset episodes.