The stock market, in the wake of the COVID-19 pandemic, bears striking resemblance to the economic climate after World War II.
Similar to that time period, significant changes are underway. With soldiers returning home and concerns of a recession stemming from increased unemployment, the circumstances seemed uncertain.
In an analysis conducted by Don Rissmiller and Brandon Fontaine, analysts at Strategas, they reviewed comments made by the Federal Open Market Committee in the aftermath of the war. Surprisingly, the economy demonstrated resilience during this period.
Just as the stock market soared with optimism following the war, it experienced a similar rally in the early stages of the pandemic. However, subsequent periods proved to be volatile.
As of now, the S&P 500 SPX has experienced a decline of approximately 12% from its all-time high in early 2022. Nonetheless, it has surged by around 75% from its low point in 2020.
Notably, in both the immediate post-war era and in the present post-pandemic era, there appears to be minimal correlation between industrial production and the stock market.
“It took several years of tumultuous bull and bear markets. However, by the late 1940s, the U.S. economy had restructured itself into a post-war state. It was then that both the stock market and economic data found solid ground and began sustained rallies,” explained Rissmiller and Fontaine.
This comparison between two pivotal periods in history sheds light on the cyclical nature of the stock market and its ability to rebound after times of uncertainty.