Is it 1970 all over again?
Energy price increases, negative real interest rates, and a slowing economy have many people making the comparison. Add in the froth of Dow 14,000 as compared to the “Nifty Fifty” of yesteryear and the similarities seem a cinch.
But let’s look at some details. In the early ‘70s credit was pretty easy to get. With the sub-prime crisis, banks have tightened underwriting standards. In the ‘70s we lived in a bipolar world, with an ascendant Communist block buoyed by US failure in Vietnam. Now the US is the world’s only superpower, and comparisons of Iraq to Vietnam seem far-fetched. In the ‘70s US exports were collapsing, stymied by an overvalued dollar. Now trade is burgeoning, and a hypercompetitive environment continues to drive innovation and price wars.
Comparisons of the current economy to the ‘70s are superficial, at best. At worst, they amount to little more than fear-mongering.
Douglas R. Tengdin, CFA
Chief Investment Officer
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