With the ongoing carnage in equity markets through 28 trading days (see our Chart of the Day on this topic with a 14 day free trial), today’s Throwback Thursday (TBT) post looks back to a time when we had more “high class” problems; namely a market that would seemingly only go up.  Below is an excerpt of a piece we published in February 2011 looking at what was then a forceful rally that seemed like it might last forever.  At the time, we looked to history for similarly strong rallies and found that in the 5 most similar rallies in history, the march upward continued in the next 12 months to the tune of 22% average returns.  Nevertheless, that 2011 rally fizzled out and the market was effectively unchanged by February 2012 after a rocky remainder of 2011.  So keep your head up:  what must end, will end.  From that report:

“We’ve heard a lot of comments recently that the market’s levitation since September 1st [2010] is unlike anything ever seen in the equity markets.  All the market does is go up!  Some say the rally is temporary and the result of the Fed’s fire hose of liquidity.  They say that when the Fed turns the faucet off, the party will end.  Only time will tell what the market will do going forward, but we were curious to see how common steady upward moves like we’ve seen since September 1st really are, and what they may portend for the market going forward…. As shown in the charts, in all five of the most closely correlated periods to the current one, the S&P 500 saw additional gains over the following 12 months with an average gain of 22.1%!”

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