Last Updated May 26, 2010 9:30 AM EDT
It is true that Europe's sovereign debt crisis, the same misfortune responsible for the recent volatility in the markets, would also be the primary culprit of a second wave of recession. And it is certainly a troublesome problem (which my colleague Carter Dougherty recently wrote about).
But take a look at some of the differences outlined by Tim Hayes, chief investment strategist at Ned Davis Research:
- When the Dow Jones Industrial Average plunged 18 percent during "Black Week" in October of 2008, the market was already sagging through a prolonged bear market. The current correction is occurring in the middle of a roaring bull.
- The selloff of 2008 happened after the housing bubble had burst and after institutions like Lehman Brothers had filed for bankruptcy protection. Today's declines are happening in "the most favorable economic environment since 2003," according to NDR's earnings model.
- This may be the most crucial difference: In 2008, corporations were experiencing their worst earnings since the Great Depression. In contrast, earnings for the first quarter of 2010 were the best in four years.