S&P 500 in 1995

S&P 500 in 1995(culvert.jottit.com)

2 points by dhpy 12 years ago | 5 comments

I wouldn't say that anything in 1995 caused the surge. What you see was caused by something much earlier. Think about the kick in the butt US companies got as Japanese companies started to compete with the US in the 1980's. Many companies got leaner and meaner so profits picked up. Also whatever you think of the Reagan tax cuts of the 1980's they helped companies show higher profits since that money did not have to go for taxes. Also, for many years economist could not see how the Information Technology was helping the bottom line for companies. I suspect that the mid 1990's is when companies started showing the efficiencies that IT brings and therefore pickup earnings and the raise in stocks.

pdog 12 years ago |

For some reason, near the beginning of 1995, broad money supply (M3) growth spiked dramatically higher and hasn't been that low since.

http://en.wikipedia.org/wiki/M3_(economics)

mooreds 12 years ago |

I'm not sure that looking at a complex system like the US economy and focusing on one aspect of federal regulation is useful in determining the cause of the s&p500 rise.

dhpy 12 years ago | |

It must have been a response to something though. My idea was that legislation tends to have an impact on investors pyschology. Even things not related to legislation, such as how talk of the Federal Reserve possibly discontinuing QE in September was visible in markets.

A dramatic rise like the graphs show must be a result of something serious occurring in the economy (global or otherwise). Any hypothesis are welcome.

brudgers 12 years ago | | |

1995 is when the American economy began recovering from the financial upheaval of the S&L crisis. Rising Interest rates led to an influx of investment, further fueled by the Asian Financial Crisis in 1997.

Or it was the start of the housing bubble.

Anyway, like the Dow - but perhaps to a lesser degree, the S&P 500 is a river. Poorly performing companies are replaced with better performing companies, so comparing one year to another is not Apples to Apples.

http://en.wikipedia.org/wiki/List_of_S%26P_500_companies