The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- Recent news regarding a number of key market factors has been generally positive and our main concerns are beginning to lift.
's QE2 program ended without any disturbance in bond yields.
2. Corporate earnings and guidance on future earnings from corporate leaders is better than expected, thus far.
3. The economic soft spot appears to be dissipating as Japan, the world's third largest economy, comes back online.
4. While a deal is not yet in hand, we have seen increased clarity regarding the debt ceiling debate around a $1.5 to $2.5 trillion package of spending cuts.
5. A breakthrough on the Greek debt problems in Europe has taken place with a second rescue package.
The changing environment may inspire investors to re-engage the markets and reduce defensive positions. The
posted a gain of 2.2% last week, reversing the prior week's losses. A further rally may be in store for stocks as the headwinds fade and happy days return with growth and employment picking up in the second half of the year.
It seems the market may be looking to the 1950s for inspiration. A potential path for stocks in the second half of the year may be that they continue to follow the path of 1951.
For the past 12 months, the S&P 500 index has been tracking its pattern of 60 years ago. While much of it may be owed to coincidence, there are a number of market influencing factors that echo 60 years ago that may make it more than just a coincidence. The similarities to 1951 include the following: Europe is mired in debt; tax receipts amount to 16% of GDP; and federal debt as a percent of GDP is north of 80% (the last time it was this high was 1951 as shown in the next chart).
- It is the third year of the presidential cycle.
- It is two years after the end of a recession.
- The growth rate of corporate earnings is slowing.
- There is fading resolve to continue fighting a foreign war.
- Commodity prices have rebounded powerfully from the lows of the recession.
- A gallon of gas costs a 1951 quarter.
OK, that last one is a little bit of humor. But it is true. Hard to believe that a gallon of gas today costs the same quarter (i.e. 25 cents) it cost in 1951? It does. You just have to melt down the coin. In fact, a 1951 quarter will buy you twice as much gas today as it did in 1951 when a gallon cost 25 cents. Quarters in 1951 weighted 6.25 grams and were made of 90% silver and 10% copper.
At today's metal prices a 1951 quarter, like all quarters minted from 1932-64, have a metal value worth about $7.25, based on Friday, July 22, 2011 metal prices. That will get you about two gallons of gas at last week's national average price of $3.68.
Of course, there are lots of differences between now and 60 years ago. As with the 1950s-based sitcom "Happy Days," the past looks different when looking back selectively. However, if the pattern holds -- and, importantly, the big issues overhanging the market are resolved or deferred -- we may due for a nice stock market rally in the coming months. Happy days indeed.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
Jeffrey is Chief Market Strategist and Executive Vice President at LPL Financial.