S&P 500 IndexShort
1981 SPX500 TOP ON REAGAN TAX CUTS & 27% CORRECTION FOLLOWS
Updated
The current market environment somewhat mimics the 1981 market:
Why?
The stock market rallied 31% from Nov 1979 to Nov 1980 on the optimism that Reagan would revolutionize the economy.
The Reagan Revolution led to the Tax Cuts entitled "Economic Recovery Tax Act of 1981, An act to amend the Internal Revenue Code of 1954 to encourage economic growth through reduction of the tax rates for individual taxpayers, acceleration of the capital cost recovery of investment in plant, equipment, and real property, and incentives for savings, and for other purposes. " (source: Wikipedia)
"Included in the act was an across-the-board decrease in the marginal income tax rates in the United States by 25% over three years, with the top rate falling from 70% to 50% and the bottom rate dropping from 14% to 11%. This act slashed estate taxes and trimmed taxes paid by business corporations by $150 billion over a five-year period. Additionally the tax rates were indexed for inflation, though the indexing was delayed until 1985. The act was signed into law on August 13, 1981" (source: Wikipedia)
In the current scenario of January 2018, the market has rallied 31% from November 2016 to November 2017 when a very similar tax law was passed, cutting taxes to individuals and to corporations while incentivizing business spending through accelerated depreciation deductions. Since inflation was so high back in 1981, tax "bracket-creep" was the main concern and was also a part of the tax relief, but it took years of MASSIVE, PAINFUL INFLATION which jacked up people's incomes by 100% nominally over the previous 10 years but up ZERO on a real basis, so higher tax rates slammed down "real wages" which was killing the economy.
I have noted a number of major stories of the time to give some color on what was happening and once again thanks to Wikipedia for the main points and descriptions.
Normally I would go to the library and use the NY Times microfiche and review the news for the year to find these important tidbits, which takes hours of my time. But now, it only took an hour of my time to collect, arrange and publish this useful "HEADS UP MARKET TOP" piece about how the current market is similar to the "STOCK MARKET TOP OF 1981".
My "forecast for the year 2018" is still in production, but had to get this useful info-graphic out to you right now.
Wishing you all health and happiness in the year 2018.
Tim West
Moderator of Key Hidden Levels Chat Room - Right here at TRADINGVIEW.com
Come join us.
Why?
The stock market rallied 31% from Nov 1979 to Nov 1980 on the optimism that Reagan would revolutionize the economy.
The Reagan Revolution led to the Tax Cuts entitled "Economic Recovery Tax Act of 1981, An act to amend the Internal Revenue Code of 1954 to encourage economic growth through reduction of the tax rates for individual taxpayers, acceleration of the capital cost recovery of investment in plant, equipment, and real property, and incentives for savings, and for other purposes. " (source: Wikipedia)
"Included in the act was an across-the-board decrease in the marginal income tax rates in the United States by 25% over three years, with the top rate falling from 70% to 50% and the bottom rate dropping from 14% to 11%. This act slashed estate taxes and trimmed taxes paid by business corporations by $150 billion over a five-year period. Additionally the tax rates were indexed for inflation, though the indexing was delayed until 1985. The act was signed into law on August 13, 1981" (source: Wikipedia)
In the current scenario of January 2018, the market has rallied 31% from November 2016 to November 2017 when a very similar tax law was passed, cutting taxes to individuals and to corporations while incentivizing business spending through accelerated depreciation deductions. Since inflation was so high back in 1981, tax "bracket-creep" was the main concern and was also a part of the tax relief, but it took years of MASSIVE, PAINFUL INFLATION which jacked up people's incomes by 100% nominally over the previous 10 years but up ZERO on a real basis, so higher tax rates slammed down "real wages" which was killing the economy.
I have noted a number of major stories of the time to give some color on what was happening and once again thanks to Wikipedia for the main points and descriptions.
Normally I would go to the library and use the NY Times microfiche and review the news for the year to find these important tidbits, which takes hours of my time. But now, it only took an hour of my time to collect, arrange and publish this useful "HEADS UP MARKET TOP" piece about how the current market is similar to the "STOCK MARKET TOP OF 1981".
My "forecast for the year 2018" is still in production, but had to get this useful info-graphic out to you right now.
Wishing you all health and happiness in the year 2018.
Tim West
Moderator of Key Hidden Levels Chat Room - Right here at TRADINGVIEW.com
Come join us.
Note
Note
I lived through this time frame and was paying attention to the markets since inflation was crazy back then and interest rates were soaring. The Rolling Stones wrote a song about it called "Shattered" (lyrics: "the prime rate's going up, up, up, up, UP! To live in this town."). I could add so much more to this chart but it has enough on it already.Note
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