Dow Jones 100-Year Stock Market History Chart
|Dow Index 100-Year History Chart|
Stock Market Performance Since 1900 Has Alternated Between Excitement and Disinterest
Above is a graph of stock market (Dow Jones) performance since 1900 (click on image to enlarge it). It shows year-end closing prices through 2012. (See Yearly Returns for a bar chart of the returns each year.) While some describe this history as
a steady long-term upward trend, to me it appears to show alternating periods of excitement and disinterest. For example, the periods from ’33 to ’65, and from ’82 to ’99 were periods of excitement. From ’33 to ’65 the average return was about 7% per year, plus dividends -- for a total of approximately 10%. From ’82 to ’99 the average return was about 15% per year, again plus dividends – though dividends in recent decades were significantly smaller than they were in earlier decades.
The Long Flat Periods
On the other hand, the 1905 close of 96 was not permanently eclipsed until 28 years later -- 1933; the 1965 close of 969 was not permanently eclipsed until 17 years later -- 1982. I use the word “disinterest” to characterize these long flat periods. (Note: This is a log graph. If you are not familiar with them, see About Stock Market Log Graphs.)
In the long term, you would expect that stock market performance should approximate the performance of the underlying businesses. Therefore, an obvious interpretation of the chart is that the stock market periodically gets ahead of itself by increasing faster than the underlying businesses, and then has to wait for the “real” value of the underlying businesses to catch up during the long, flat periods of “disinterest.” If that is the case, we could well be in another one of those periods of “disinterest” -- though when you’re actually in one of those periods, you may find other words more descriptive….
Note: The above chart and discussion ignores the impact of inflation. To see the long flat periods adjusted for inflation, see 100 Years of Inflation-Adjusted Stock Market History. Warning: not for the faint of heart!
The Monthly Update, & Adding the 25-Year Moving Average as a Support LevelThe March 2013 Stock Market Performance post includes a recap of the most recent month and year-to-date, plus comparisons to important milestones such as all-time highs and crash lows. In addition, it includes the most recent projection for 10-year market returns. The 25-year moving average can be a useful addition to the above graph. As discussed in Dow 25-Year Moving Average History, the market has very rarely fallen below its 25-year moving average. That is, historically this moving average has been a reliable support level during secular bear markets. That graph is updated infrequently, as appropriate.
Oh, what is “interocular trauma”? It was the late Professor Harry Roberts’ way of saying “it hits you right between the eyes.”
Recommended Reading:Other long-term perspective posts
100 Years of Treasury Bond Interest Rates: Similar perspective on interest rates.
Inflation-Adjusted Stock Market History: Like this post, but adjusted for inflation. And, another eye-opening perspective on "the long flat periods."
100 Years of Housing Price History: Graph of housing price index since 1900.
Comparing Housing vs. Stock Market Growth: shows long-term stock market growth including reinvested dividends (the chart above excludes dividends).
Dow Yearly Return History: bar graph of yearly total return (i.e., including dividends) beginning 1929.
Dow Price/Earnings Ratio History Since 1929 - Yearly Graph: Similar perspective on P/E ratio.
Closer looks at bubbles, alternating excitement/disinterest, & long flat periods
Chart of 1929 Stock Market Crash for a closer look at 1929-1932.
The 25 Best & Worst Yearly Stock Market Returns: a closer look at 1-year returns.
Borrowing Returns from the Future: the price of extraordinary current performance may be decreased future returns.
Dow Index Inflation-Adjusted Close History: Impact of inflation adjustment on the long flat periods.
The Composition of 10-Year Returns: additional perspective on the alternating excitement and disinterest phenomenon.
Irrational Exuberance: Robert Shiller’s book discussing the causes of bubbles, and presaging the bursting of the tech bubble in 2000.
Who's Afraid of a Sideways Market?: Interesting perspective on long flat periods from Morningstar.
For other popular posts, see the sidebar to the left or the blog header.
Data and ComputationsFor those who would like to perform additional analysis, see this post for a link to my Dow Jones yearly closing data and the associated calculations. The spreadsheet will automatically calculate the Dow's growth rate between any two years you input (e.g., average stock market return between 1982 and 1999, including dividends).
Copyright © 2011. Last modified: 3/30/2013
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