Yesterday we highlighted that One Major Difference between the Crash of '87 and the current market environment is that the S&P 500 had rallied much more heading into that crash than it has recently.
David Gaffen over at the Wall Street Journal recently highlighted the increasing comparisons in the financial community between '87 and now over at Market Beat. Two of the comparisons he pointed out that people have been using were the increase in bond yields (decline in bonds) and the falling dollar. Gaffen noted however that the similarities are really not too similar:
"The dollar is falling, but not nearly as sharply as it was in 1987. Compared with a year ago, it is nearly unchanged against the euro and stronger against the yen. In comparison, the dollar index fell 45% from mid-1985 to the 1987 stock crash... Bond yields are rising, too, but the increase in yields was more severe in 1987.From the beginning of the year through Oct. 19, 1987, just before the crash, the 10-year note's yield rose from 7.23% to 10.15%. Since July 1, 2005, the 10-year yield has risen from 4.06% to 5.05%."
To add to Gaffen's point, we created charts comparing the changes in the 10-Year Treasury Note and the US Dollar in the year and a half leading up to the '87 crash and the prior year and a half.
Definitely not that similar.