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Oliver's Insights – Lessons for US shares today from Australia in the early 1990s

This note compares the experience in the US today with that in Australia in the early 1990s when it was recovering from a similar financial crisis and major recession.

The key points are as follows:

- Shares normally go through a tough patch in the second year following a bear market low. This can reflect worries about monetary policy tightening or worries about a double dip back into recession.
- This is certainly the case in the US this year, where double dips fears have intensified, and this has affected most global share markets.
- The US today appears to resemble the performance of the Australian economy and share market following its early 1990s financial crisis and recession.
- Double dip fears were also a big worry in Australia in 1992, contributing to a difficult year for the local share market at the time. However this gave way to better conditions in 1993. The US may be following a similar path.

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