1987 Redux?

Lately, we’ve been hearing a lot of silly talk about how now is “just like 1987.”
Please. I need more than “a new Fed chairman and rising interest rates” to see the similarities. Unless Cutting Crew is getting popular again, then no–this is not like 1987.
There is, however, one big change going on in the market, and it’s actually more important that the level of stocks. I think the leadership of cyclicals stocks has run its course.
Here’s a chart of the Morgan Stanley Cyclical Index (^CYC) divided by the S&P 500:

There are three other times that cyclicals have burned out at this level. On May 10, the ratio peaked at 0.672. It’s fallen back since, and it’s down again today.

Posted by Eddy Elfenbein on May 24th, 2006 at 3:13 pm

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