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Data hints at correlation between the S&P 500 now and during the 2008 collapse

Data hints at correlation between the S&P 500 now and during the 2008 collapse

Over the last month, the S&P 500 index, an index of the US 500 largest companies, lost over 8% as mounting pressures from inflation and rising rates are causing investors to abandon risk assets. 

Though bear markets and crashes are hard to predict, a minority of market participants seem to have a premonition for doom approaching. Micheal Burry is one such investor who predicted the famous 2008 crisis and has recently warned of impending doom coming as it looks like his calls will be vindicated.   

For example, there seem to be eerie correlations in behavior between the S&P index in 2008 and today. Namely, the founder of Mott Capital, Michael J. Kramer, posted a chart on Twitter on September 29 that shows the index making almost the same moves in 2008 as its making now in 2022.

S&P 2008 VS S&P 2022. Source: Twitter

Next moves

If history is about to repeat itself and Burry is right, the market could see another leg down before bouncing off of lows and heading up big. The other viable scenario is for the markets to bounce sideways for a few weeks before the bottom falls under the market after more bad news on the macro front. 

Though, with the various macro pressures in the world, perhaps it would be more prudent to sit this one out than to try and guess which way the markets may go, as some billionaires sound bearish on the economy. 

Its actually different

But unlike in 2008, today, the unemployment rate is relatively low in the US, wages are rising, and inflation is roughly 8% higher than it was back then. Prices are rising much faster than any time since the 1980s, and the S&P 500 in 2008 lost 37%, while in 2022, the S&P lost 19% year-to-date (YTD). 

Moreover, today’s bond market is in much worse condition, down 12% than in 2008, down ‘just’ 4%. Real estate investors in 2008 lost 43%, while in 2022, the real estate markets are down by 22%. In the mean time, Google searches for real estate market crash hit record levels due to increasing mortgage rates in 2022.   

Not so simple

Taking a broader view, it seems that 2008 was much worse regarding asset performance than 2022. If investing was as easy as finding a chart that pits two time periods one against the other and then simply copying what comes next, there would be many more millionaires worldwide.

Finally, throughout history, the best strategy that beat out all predictions is to invest monthly into broad-based exchange-traded funds (ETFs) and shares of the companies with strong cash flows, large competitive moats, and leadership in their industry. 

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.  

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