"The Smoot-Hawley Tariff Act of 1930 (P.L. 71-361, sometimes known as the Hawley-Smoot Tariff Act; officially the Tariff Act of 1930)[1] was an act signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels. The ensuing retaliatory tariffs by U.S. trading partners reduced American exports and imports by more than half and according to some views may have contributed to the severity of the Great Depression." read more at WikipediaDuring the 2009 market rally off the March lows, the Dow is up 43.1% and we briefly hit the 9,441 38% retracement level on August 7. If we mock the 1929 bear market rally then we retrace 50% or to 10,355. We still have the 38% magical fib level to break.
"No one had advocated higher tariffs during the 1928 campaign, and Hoover originated the drive for a higher tariff in an effort to help the farmers by raising duties on agricultural products. When the bill came to the House, however, it added tariffs on many other products. The increased duties on agriculture were not very important, since farm products were generally export commodities, and little was imported. Duties were raised on sugar to "do something for" the Western beet-sugar farmer; on wheat to subsidize the marginal Northwestern wheat farmers at the expense of their Canadian neighbors; on flaxseed to protect the Northwest farmers against Argentina; on cotton to protect the marginal Imperial Valley farmer against Egypt; on cattle and dairy products to injure the Canadian border trade; on hides, leather, and shoes; on wool, wool rags, and woolen textiles; on agricultural chemicals; on meat to hamper imports from Argentina; on cotton textiles to relieve this "depressed industry"; on velvets and other silks; on decorated china, surgical instruments, and other glass instruments; on pocket knives and watch movements.[5] The tariff rates were now the highest in American history.
The stock market broke sharply on the day that Hoover agreed to sign the Smoot–Hawley Bill. This bill gave the signal for protectionism to proliferate all over the world. Markets, and the international division of labor, were hampered, and American consumers were further burdened, and farm as well as other export industries were hindered by the ensuing decline of international trade." via America's Great Depression by Rothbard
Below Art Cashin spoke about the 1929-1930 bear market rally.
Like 1930, unexpected protectionism could kill global trade and the global reflationary effort. The reflation trade has been ON FIRE since the beginning of the year (1,2,3,4). Will the reflation trade overshoot relative to underlying demand or is this global bull for real. By the way if you saw Trader: The Documentary about Paul Tudor Jones, he and his partners saw a statistical relationship between 1929 and the days leading up to the 1987 crash (it used to be video #2 on youtube, find it). He now calls this run up a bear market rally, Tudor Investment Calls Stock Gain a Bear-Market Rally (Bloomberg). At some point everything with a price seems like a short (no recommendation) but without a catalyst the Dow could hit 30,000 (J.Rogers). Reflation trade charts coming up.
For more bear market rally comparisons visit..
Denninger Looks Back At 2001 Bear Market Rally, Inventory Drawdown
S&P Testing 2002 Bear Market Rally High
Charts Comparing 1974, 1982, 2002 Bottoms To Today, 80s Recovery
1973-75 Recession History, Chart, 2009 Comparison?
