Backtracking on the S&P500 seems as good a place to get started as any. I'll start in the 80's and work forward. Some noteworthy points:- Peak-to-trough, the market was off -20% from '81 to midway through '82. The cause, as I read it, was Volcker raising interests rates to set back inflation, which had hit around 13% in '80.
- The LBO era of the '80s and a surge of IPOs(200 in '81 to 450 in '83) helped drive the market to new highs from 84-87. The explanation from Hafer and Hein, The Stock Market, is that the M&A activity took shares off the market. With demand going up for less shares, prices rallied. The resulting market tacked on 130% from '84 to the '87 high.
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