Observations: 2010 End-of-Year Stock Market Update

Saturday, January 1, 2011

2010 End-of-Year Stock Market Update

Long-term 100 year stock market (Dow) history/trend chart, moving average

100-Year Stock Market Chart through 2010
Note: For 2011, see 2011 End-of-Year Stock Market Update.

December, 4th Quarter, Year-To-Date & Recovery-To-Date Review

The market ended the year with a bang, tacking on almost as many points in December as it had from January through November. In the process, it set not only a new 52-week high, but a multi-year high. The DJIA (Dow Jones Industrial Average) ended the year at 11,577.51, after peaking at 11,585 on December 29th. That peak was the highest close since August, 28, 2008 when the financial/credit crisis started the market on its stomach-churning crash to 6,547. At year-end, the dividend yield was 2.48%.

Almost no matter how you look at it, we're on a roll. Here's how the December close stacks up against some earlier closes:

From Prior Month Close of 11,007: The Dow is up 571 point (5.2%)!
From 3rd Quarter Close of 10,788: Up 789 points (7.3%)
From 2009 Close of 10,428: Up 1150 points (11.0%)
From Recent Low of 9986 on August 26, 2010: Up 1591 points (15.9%)
From 52-Week Low of 9686 on July 2, 2010: Up 1891 points (19.5%)!
From Crash Low of 6547 on March 9, 2009: Up 5031 points (76.8%)!!

Pretty impressive. Up 5% in one month and up 20% in the last half of the year are certainly eye-catching numbers. Even more impressive, however, is the fact that the market is up over 75% in less than 2 years.

Note: For total return info (i.e., including dividends), see Stock Market Total Returns: 19xx - 2010
For the most recent monthly update, see "Recent Posts" in the header or sidebar.

Tough to Find Bad News
I said "almost" no matter how you look at it. Only died-in-the wool pessimists, and maybe retirees, could find anything to complain about in this market. Still, just for the record, it's worth noting that:

From 52-Week High of 11,585 on December 29: we're down 8 points (0.1%) OMG!!!
From All-Time High of 14,164 on Oct 9, 2007: the Dow is still down 2587 points (18.3%)

To complete the picture, for the year-end post let's take a look at where we are compared to the all-time highs on a couple of other key indexes:

S&P 500: closed 2010 at 1258, up 12.8% for the year -- but, 20% off its all-time high close of 1565 set October 9, 2007
Nasdaq: closed 2010 at 2653, up 16.9% for the year, -- but, 47% off its all-time high close of 5049 set March 10, 2000. Over 10 years later, we're still down close to 50% from the highs set during the dot-com era. It boggles the mind....

Still, I do believe that if on March 9, 2009 I had told you that we'd be where we are at the end of 2010, few among you would have complained.

100-Year Stock Market Chart (through 2010) with 25-Year Moving Average

The chart at the top of this post (click to expand) shows year-end closing prices for the Dow Index from 1901 through 2010, with the addition of the 25-year moving average. Because this chart covers such a long period of time, I have used a log scale on the vertical axis. If you're not familiar with log scales, see About Log Graphs.

The Dow 25-Year moving average tends to provide support even for secular bear markets. The March 9, 2009 bottom of 6547 was very near the 25-year moving average at that time; that moving average is now at 7329. Thus, it would take a drop of more than 33% before this potential level of support would come into play again.

The Next 10 Years

In the first quarter of last year, my stock market projection model projected 10-year returns in the neighborhood of 5.5%. Last year's above-trend performance will reduce future prospects somewhat; my preliminary 10-year projection is in the neighborhood of 4.7%. Since my model is earnings based, I'll have to wait for 2010 earnings data before finalizing the projection. I'll post a formal update around the end of the quarter.

100 Years of Stock Market History: Includes additional observations about the 100-year chart and the long flat periods.
Dow Yearly Returns since 1929 (bar graph)
What has the range of returns (minimum & maximum) been for 1,2, 3, ... 100-year periods?
10-Year Stock Market Projection shows how expected returns have changed over the last 10 years.
100 Years of Interest Rate History: graph of Treasury Note interest rates since 1900
Who's Afraid of a Sideways Market?: Interesting perspective on long flat periods from Morningstar.
For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left.

Copyright © 2011. Last modified: 1/7/2012