Why the rally of 2009 is not like that of 2003

Many investors believe that we will see a long market rally similar to the one between 2003 and 2007. But, as Richard McCreery explains, things are very different now.

There are many parallels one can draw with the stock market rally we have seen since mid-March (earlier in emerging markets) and that of the start of the last major stock market rally between 2003 and 2007. Many investors appear to believe that, just like then, this is the start of a much longer bull market that could go on to reach the heights of the previous two bull markets. However, there are a number of reasons why this rally is very different from that of 2003.

A good reason for comparing this rally with that in 2003 is that it began in the trough between the peaks of 2000 and 2007. If you look at 15-year charts for the S&P 500, the Nikkei 225, the FTSE All Share, the FTSE 100 and the CAC 40, you will see that they all shared double-top formations with markets peaking at similar levels in 2000 and 2007. None of them have exactly the same pattern, but there are clear similarities in the key index levels. The second interesting similarity is that each of these markets also bottomed out at around the same level in 2003 and 2009.

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