For some time now, Bridgewater Capital’s Ray Dalio has cited the 1937 analogy to caution investors on the market environment. Here are similarities between then and now: US interest rates were low for a long time in the 1930s and both periods experienced huge stock-market rallies after crashes and deep recessions. It’s hope though that’s where the similarities will end. After falling more than 80% during the Great Depression, US stocks found a bottom in the summer of 1932. From the bottom in 1932 to early 1937, there was an enormous rally, with stocks gaining about 415% in fewer than five years. However, after peaking in February 1937, stocks fell 50% over the next year, culminating in a 25% loss in March 1938. After witnessing the greatest stock-market crash in history from 1929 to 1932, US investors watched stocks get chopped in half a few years later. For those who believe there’s something to be learnt from history, here’s what Benjamin Roth, a lawyer who kept a diary throughout...
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