Deflationary Depression

In the movie Fletch, Chevy Chase comments that a death was very sudden. The doctor responds that the patient had been sick for years, and had been in intensive care for weeks before the death. Chevy responds with "When he actually died, that was extremely sudden." (Click for clip but be forewarned it has unpleasant moments.) 

US Stocks have lost about 8% in the last 8 trading days. This decline may seem sudden, but the sickness has been evident for a long time.

US Stocks may be catching up

The decline in commodity prices, especially oil, is well-publicized. Perhaps less well-known is the 55% decline in copper and the 42% decline in gold.

Stocks in the US hit all-time highs in 2015. In other parts of the world, stocks have been in decline for almost a decade. Emerging markets stocks, for example, have lost almost half their value, and never recovered their pre-crisis levels. Even US Treasury bonds have also suffered significantly.  Until last May, US stocks had been immune to these problems.

symbolPeak DatePeakcurrent% Declinetime since Peak
US - Dow Jones IndustrialsMay 201518,31216,346-10.7%7 months
International stocksEFAOct. 2007$86.10$54.93-36.2%9 years, 2 months
Emerging Markets stocksEEMOct. 2007$55.67$29.51-47.0%9 years, 2 months
Dow Jones TransportsDJTNov 20149,2036,946-24.5%14 months
Russell 2000 (small cap)IWMJune 2015$129.01$103.81-19.5%6 months
Long-term US TreasuryTLTJan. 2015$138.28$123.36-10.8%11 months
Oil ($/barrel, West Texas Int.) May 2008$147.27$32.88-77.7%7 years, 6 months
Gold ($/ounce)Sept. 2011$1,921$1,106-42.4%4 years, 3 months
Copper ($/pound)Jan 2011$4.62$2.04-55.8%5 years

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