Van Halen released their first hit Album in 1978 when the US was a much different place: Turtleneck’s and overalls were all the rage, the first Star Wars film, Episode IV: A New Hope became an instant classic and the first ever cellular mobile phone was created. In financial and economic news though, things were not so great. The Dow Jones Industrial Average Index was in the middle of a 16-year flat period from 1966 to 1982. The average cost of a new house was $54,800 and average annual income was $17,000 per year. Inflation was over 7.6% and the Federal Reserve was keeping benchmark rates at a whopping 11.25%. Hindsight is 20/20 but wouldn’t it have been great to load up on 30year US Treasuries paying 15% annually?!
Some of these numbers really make you “Jump” like Eddie’s 1984 hit, but this was when the US economy really started heating up. Much like the fiery Van Halen solo “Eruption”, the stock market was at the beginning of a fantastic, nearly 20year bull run through the Dot-Com Bubble as inflation was slowing down. Two stocks “erupting” today draw roots in 1984 as well. A stock making news this week was IBM, making the decision to split its hardware and cloud businesses. The stock was up 8% on the news, offering some respite from underperformance for much of the last decade. IBM was the largest company by market capitalization in 1984. Today’s largest company, Apple, released their first Macintosh computer in 1984. What a run that company has had since then.
While we will leave some puns for future articles, Mr. Van Halen was truly an icon and innovator of his time. Many tried to replicate his style and techniques but couldn’t quite piece it together the same way. With the market, history rarely repeats itself, but often rhymes – and we will see if anyone can try to successfully mimic Mr. Van Halen’s musical genius.