Stock market's fourth-quarter crash and comeback draws comparisons on Wall Street to '87, '95

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Right now, Wall Street is spending a lot of time debating what year from the past looks most like 2019 – and what that means for the market outlook.

The markets are always a running argument among buyers and sellers about the current value of the future.

The Fed was tightening aggressively and the president was ratcheting up trade protections against an export-reliant Asian economic Power . Stock valuations hit an historic extreme and a correction turned into a crash thanks in part to untested trading techniques. By early 1995, the U.S. economy was clearly slowing. Fed Chair Alan Greenspan signaled he was likely through tightening, and in fact by summer the Fed cut rates as GDP growth slipped toward 1 percent for a quarter. By then, stocks got the message: a productivity boom was kicking in, growth resumed without much inflation, volatility collapsed.

Treasury yields remained tame, dividend-centric and big secular-growth stocks led the market higher as the world awaited the Brexit vote. Hear the echoes with the current setup. The 2016 analogy works only so far, given we'll have no 2019 election to flip the story entirely from slow-growth, fiscal restraint, deflation risk to tax cuts, deregulation and reflationary policy. But for now the markets are acting not unlike the way they did in the first half of 2016.

 

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