1987 Redux?

If you type that title into google, you’ll get plenty of hits. Most of them are from the last 12 months, and nearly all of them post 2008, as prognosticators looked to seize every market hiccup as a potential sign of a crash. There hasn’t been such a crash as of this writing. What piqued my interest with respect to 1987 comparisons was a passage I came across in a biography of Geoge Soros:

“I expected the break to come in stocks, but in retrospect it obviously began in the bond market, particularly the Japanese bond market, where yields more than doubled in just a matter of weeks earlier this year.” As a result, the U.S. bond market had gone into a tailspin during the spring of 1987. Failing to see the downturn coming on Wall Street, Soros had still expected to see a healthy U.S. stock market.

As in 1987, Japanese rates doubled earlier in the year, after Abenomics went into overdrive. The US bond market, as in 1987 suffered a back up in interest rates. The 1987 edition is below:


Followed by the current day situation.

fredgraph (6)

Now, it’s quite easy to produce similar looking charts in a given instrument over a similar period of time. That alone isn’t really indicative of anything. However, the two periods also shared the existence of fresh highs in margin debt and concerns over fiscal issues. Of all the periods which have looked similar to 1987 since, this appears to be the most similar. At the very least, the parallels are very interesting.


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