Tuesday, February 10, 2009

Equity Markets: Expect Volatility

The chart below details the four week rolling change in the value of the DJIA during the Great Depression, against the index itself. Notice all the periods in which the market had monthly returns of 10-20% all the while declining from almost 400 to 50.

In other words, if you feel there is still significant deterioration that will take place in the economy (I do), be very careful at interpreting these 10-20% rallies OR (to be my own devil's advocate), there will be plenty of short-term opportunities to buy equities regardless of your expectations for the economy...

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