No, we're not calling for an October crash... But if the S&P rallies another +12%, history does say to reduce US equity exposure. Up 30%-ish years aren't uncommon. Up +40% years most certainly are. Looking further out, recall that 1988 and 1989 saw good S&P returns even though corporate earnings were flat. The reason: a more dovish Fed and lower long-term rates. That's really why it feels like 1987 to us, but remember that the S&P today is a far cry from its old cyclical self back in the late 1980s. Lower rates help market valuations much more than fundamentals now.

We've been thinking a lot about 1987 over the past few days, because having been in the business back then we are feeling a bit of déjà vu. Why? Just look at the monthly performance numbers for the S&P 500, comparing 1987 to 2019:

January: +13.2% in 1987, 7.9% in 2019. Strong out of the box in both years…

February: +3.7% then, 3.0% this year. A nice follow through from a ripping January…

March: +2.6% then, +1.8% this year. Even more follow through…

Q1 returns: +20.4% then, 13.1% now. A whole year's worth of returns in 90 days!

April: -1.5% then, +3.9% now. Not great in 1987, but 2019 seemed to want to catch up after lagging in Q1…