100 Year Dow Chart with 25-Year Moving Average
Above is a very long-term chart of the Dow, including the 25-year moving average (click chart to expand); it uses this past month's close for this year's close. It shows that the market rarely falls very far below its 25-year moving average.
August, Year-To-Date & Recovery-To-Date Review
Note: click here for September data
In early March 2009, I posted Dow At 25-Year Moving Average. The Dow continued lower for several more days before bottoming at 6547 on March 9 -- very near the 25-year moving average at the time. Since then, the Dow is up over 3400 points. If we treat the August 31 close of 10,015 as the 2010 close, the moving average is now at 7,266. (See the chart above. Click to expand.)
August was another disappointing month. The market lost more than 4%. The more than 450-point loss took the market again back near the psychologically important 10,000 level; it also took the market from being essentially flat for the year to being down about 4% (413 points) on a year-to-date basis. Volatility, a measured by the VIX, was reasonably steady throughout the month, closing the month at 26.05 after opening the month at 23.5.
The market is now up about 53% from its low of 18 months ago. On the other hand, there is the glass is half empty view -- it is now more than 10% below the April high close of 11205.
The Next 10 YearsAs of the beginning of 2010, my stock market projection model projected 10-year returns in the neighborhood of 5.5%. The 10% market decrease in the second quarter slightly increased forecast returns to 5.9% from mid-year to the end of 2019. I believe long-term returns from current levels are likely to be below average as well.
Related Reading:10-Year Stock Market Projection shows how expected returns have changed over the last 10 years.
Projecting Stock Market Returns introduces the projection methodology.
Dow Yearly Returns since 1929 (bar graph)
What was the Dow rate of return for the last 5, 10, 20 years?
What has the range of returns (minimum & maximum) been for 1, 5, 10, 20-year periods?
The 1929 Stock Market Crash Revisited: what if it happened again?
Who's Afraid of a Sideways Market?: Interesting perspective on long flat periods from Morningstar.
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Last modified: 10/1/2010