A Look at the Stock Market Over the Decades
We've just finished the first quarter of 2004. For the most part, the market was muted (the S&P 500 was up 1.29% and the Dow Jones Industrial down .92%) when compared to the wide swings that we have had since the begining of this decade. So, what should we expect through 2010?
Last September, we sent to you a communication regarding the performance of the stock market during the four separate years of the presidential election cycle. At that time, we stated that we do not put any faith in technical analysis. That's still the case, but it's interesting (and fun) to look at different patterns that have emerged in the stock market over the years. So, here is another interesting story that shows a historical pattern which has been (somewhat) established by the stock market. This informational look at the market was brought to our attention by Mulberry Communications who, by the way, was also a source for our Presidential Election Cycle article.
1920's...... +15% 1930's...... -.03% 1940's...... +8.5% 1950's...... +18.9%
1960's...... +5.3% 1970's...... +5.2% 1980's...... +18% 1990's...... +18.4%
Okay, that's kinda interesting...not terribly, but kinda. For instance, it seems that the market follows a decade of good performance with performance that is, shall we say, anemic, and anemic decades are sometimes followed by a decade of good returns. However, we are only measuring a total of eight decades, and there are two glaring exceptions to our finding...the 1970's and the 1990's.
What can we expect for the current decade?
The 1990's completed two decades, back to back, of good returns. Therefore, many pundit's are stating that we are now in a period when we can expect "anemic" returns.
We certainly do not have a crystal ball, but it was pointed out to us in the Mulberry Communications' article that the market has performed so poorly during the first four years of this decade, it will need to increase ten percent per year over the next six years simply to equal the "average" of the "anemic" decades listed above.
Ten percent isn't what we had during the heady 80's and 90's but it is a reasonably good annual return. We would of course prefer more (we always want more) but would be pleased with 10% per year for the next six years. Who knows, maybe the 2010's will be another decade of good performance. Why not stay the course just in case?
Remember....1: Buy quality....2: Hold long term....3: Control the risk as best you can (through diversification)....4: Stay within your comfort zone.... 5: Pay no attention to the man behind the curtain (short term market fluctuations).
If you would like a complete copy of the Mulberry Communications ' article please feel free to send us your request..
Thanks for your business,
Sycamore Financial Group
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