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It's déjà vu all over again.

Or at least that's the fear.

Last summer the U.S. economy slowed. Gross domestic product growth dropped to 1.7% in the second quarter of 2010 from 3.7% in the first quarter and from 5% in the fourth quarter of 2009. In 2011, GDP growth has dropped to 1.8% in the first quarter from 3.1% in the fourth quarter of 2010. Economic indicators are pointing to weak growth in the quarter that ends June 30.

And last summer the stock market went into a significant swoon. From an April 26, 2010, close at 1,212, the Standard & Poor's 500 Index ($INX) fell 15.2% to 1,028 on July 6. Stocks then recovered to 1,126 on the S&P 500 by Aug. 5 before giving up almost all that regained ground and hitting 1,047 on Aug. 26.

From there the market staged a sustained rally, climbing 30.3% to 1,364 on the S&P 500 on April 29, 2011, from that Aug. 26, 2010, low.

Click graphic to see interactive chart

SPDR S&P 500
Graphical chart for SPY

You can understand feelings of déjà vu as we head into the summer of 2011. And the fear. The S&P 500 hit a high on April 29, almost the same date as the 2010 high on April 26. From there the S&P 500 has lost 4.9%, and the index finished lower last week for a fifth straight week.

So how likely is it that the summer of 2011 will turn into a replay of the summer of 2010? That would mean we're in for a 10% drop from here.

And what, if any, changes should you make in your portfolio?

The fear in 2010 was that the economy was slipping back toward a double-dip recession -- or at best to a period of stagnant growth as the effects of the February 2009 stimulus package wore off and the Federal Reserve started to reduce its balance sheet. The Federal Reserve had started to buy mortgage-backed securities in November 2008 to help stabilize the financial markets in the wake of the Bear Stearns and Lehman Brothers bankruptcies. By June 2010, the Fed's balance sheet had reached $2.1 trillion, up from $700 billion to $800 billion before the crisis, and the bank decided to halt further purchases because the economy had started to improve. That had the effect of gradually reducing the Fed's holdings as debt securities matured. In June, the Fed's balance sheet was projected to fall to $1.7 billion by 2012.

Image: Jim Jubak

Jim Jubak

Sound familiar?

In June 2011 the 2009 stimulus package is even farther away in the rearview mirror, and first-quarter higher oil prices cost the U.S. economy about $120 billion, enough to pretty much wipe out the stimulus from the December lame-duck tax package. The Federal Reserve has announced that its second round of bond buying, QE2, will come to an end in June, although the bank has not yet said when it will stop buying new Treasurys as current holdings mature.

The parallels are even stronger if you include the euro crisis.

By the end of April 2010 the Greek debt crisis had panicked European financial markets and politicians. Would Spain be next? Could the United Kingdom get sucked in? Germany's leader, Angela Merkel, voiced the opinion that Greece should never have been allowed into the eurozone.

By May 2011, it was clear that last year's bailout of Greece wasn't going to work as planned. The country's finances had continued to deteriorate, with revenue well below projections and asset sales lagging. Greece was supposed to be able to start accessing the financial markets to sell debt in 2012, but the country was clearly going to remain locked out of the markets for longer than that. Halting Greek progress on increasing revenue and cutting spending led Jean-Claude Juncker, the head of the eurozone's group of financial ministers, to question the ability of the International Monetary Fund to pay out its part of the $17 billion that Greece needed to fund its debt in June. Without those funds, Greece looked as if it could be headed for default.

The parallels aren't nearly so close if you compare how the financial markets and the U.S. economy worked their way out of the slump in June 2010 and the available options in June 2011.

Some comparisons are quite grim

In 2010 the Federal Reserve could launch a new program of quantitative easing, saying in August that it would start buying Treasurys and mortgage-backed securities to replace issues that had matured in order to keep the Fed's holdings at current levels. Then, in November, the central bank announced a buying program that would add $600 billion to the Fed's balance sheet by the end of the second quarter of 2011.

In 2011, the Fed doesn't appear to be seriously contemplating a third round of quantitative easing. Politically, it would expose the Fed to more criticism at a time when critics of the bank's policies have already turned up the heat. And economically, the Fed faces pressure from the interest-rate increases by the European Central Bank to begin normalizing U.S. interest rates.