It was postulated here earlier in the year that 2005 could very well turn out a lot like 1994, the last time the Fed went on autopilot and raised interest rates consistently for an extended period of time. The result was a flat-to-down market that ended up a mere 1% for the year (only after a substantial rally late in the year). As some of us expected, 2005 has indeed played out the markets tend to do when the Fed is increasing the cost of money.

To see exactly how similar it has been I decided to construct a year-to-date chart of the S&P 500 and compare it to the same nine-month period in 1994. Below you will find both charts, 1994 first, followed by 2005.