The table herein was showcased in the November 10, 2009, issue of the Wall Street Journal's "Ahead of the Street" column, which makes a rather discouragingcomparison between the market and economic climates that prevailed in 1983 and 2009. Both years were notable for deep recessions and extreme volatility.
Despite the fact that the unemployment rate is the same at 10.2%, the two stats that stand out in bold relief are that...
(1) the S&P 500's P/E ratio is twice as high (18.9) now as it was in 1983 (9.5)and
(2) In 1983 household debt as a percentage of disposable income was only 62% versus 122% today, nearly twice as high.
High P/E ratios tend to put a cap on the upside potential of stock market rally.
High household debt threatens to dampen consumer spending and impair the convalescence of a crippled housing market that is currently on life support.
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