Stock prices at Great Depression levels?

I have recently received some calls and emails asking me to update my long term stock price charts… because they don't show "Great Depression" price levels. Well, I can assure all who are wondering about it that they are indeed up to date. Let's take a look at some low points in past stock index prices, with a focus on the S&P Composite as compiled by Robert Shiller. This data is based on monthly averages, converted from US Dollars to grams of gold.

Click on the chart to download a pdf.

The lowest low in his series occurs in June of 1877 when the S&P hit 3.7 grams. The next lowest point is in January of 1980, at 4.1 grams. The third lowest in August of 1896 at 5.7 grams. And the fourth and fifth lowest points early and late in the Great Depression, June of 1933 and April of 1942, 7.2 grams and 7.0 grams, respectively.

Honorable mention goes to the low of the recession of 1973-1974, 11.2 grams (basically the start of a bull trap embedded in the 1970's bear market) and to the post financial crisis low of 2011 at 20.3 grams.

So where are we today? The most recent daily low close was on 23-Mar-2020 at 45.6 grams. The latest close, 12-Jun-2020, was at 54.6 grams. Unlike the S&P's dollar price, which is near its all-time high, its price in gold is far below its all-time high of 173.1 grams (68% below!)

Obviously, we are a long way from Great Depression price levels, and even farther from making new all-time lows. But that doesn't mean that they may not be in the cards eventually. As you can see, prices below 10 grams come along fairly frequently, and occasionally those levels last for years. I would not rule out a 60% to 80% or even a 90% drop in prices from current levels as this recession plays out… especially if the run from 2011 to 2019 turns out to be a massive bull trap echoing the rally of 1975 and 1976 (where dollar prices also returned to near all-time highs).

Keep in mind that dollar prices for stocks could continue to rise to new highs, but if the value of those dollars collapses, we could still see new lows for stocks when priced in gold.

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