Will Stocks Rally in 2009?

Many comparisons have been made between the current economic climate and the Depression era. With the Dow and S&P poised to have their worst yearly performances since 1931, here's a look at what happened in the years that followed.

After the crash in 1929, the Dow and S&P finished the year down 17% and 11% respectively. It was the years that followed that brought equities down nearly 90%. In 1930, the Dow fell nearly 34% followed by another 53% in 1931 and 22% in 1932. The S&P 500 followed a similar pattern, slightly outperforming the Dow. The markets finally turned in 1933.

So far for 2008, the Dow and S&P are down nearly 36% and 41% YTD, making this the worst year since 1931 for the two indices. The question remains whether 2009 will be like 1932 and another loser or will it be like 1933 which saw a whopping 67% rise in the Dow and 48% gain in the S&P. In fact, after the bottom, the Dow saw gains for 5 of 6 years with four of those years gaining ~25% or higher, a rally you would not want to miss.

The futures are pointing up this morning led by Alcoa , Bank of America , Citigroup , General Motors and Chevron .

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