Observations: October 2011 Stock Market Update

Tuesday, November 1, 2011

October 2011 Stock Market Update

Turnaround

A month ago, the Dow had just completed its fifth straight losing month, and the worst month of the year; it was within hailing distance of its 52-week low. The VIX, a measure of volatility (and fear) had just had its highest monthly close of the year. And, we were headed into October -- the month that gave us the 1929 crash, the 1987 crash, and perhaps the most stomach-churning month of the 2008-2009 crash.

Early in the month, on October 3, a new 52-week closing low was indeed established -- 10,655. However, rather than give us a repeat performance of Octobers past, spurred on by optimism regarding resolution of the European sovereign debt crisis, the Dow delivered the best performance in almost 10 years. The DJIA (Dow Jones Industrial Average) ended the month up close to 10% at 11,955.01 -- back above water for the year.

October, Year-To-Date & Recovery-To-Date Review

Here's where we stand vs. some key dates and milestones:

From All-Time High of 14,165 on Oct 9, 2007: the Dow is down 2210 points (15.6%)
From Crash Low of 6547 on March 9, 2009: Up 5408 points (82.6%)
From the New 52-Week Low of 10,655 on October 3, 2011: Up 1300 points (12.2%)!
From December, 2010 Close of 11,578: The Dow is up 378 points (3.3%)
From 52-week High of 12,811 on April 29, 2011: the Dow is down 856 points (6.7%)
From Prior Month Close of 10,913: The Dow is up 1042 points (9.5%)

For other recent results, see September stock market results, and November stock market results
Note: At the end of the crash, the Dow had lost about 54% of its value (from the all-time high). For an explanation of how it can be up over 80% since then and still be well below the all-time high, see The Importance of Avoiding Large Losses.

The Next 10 Years

Last month, my stock market projection model projected below average 10-year returns in the 6-7% range. Because, significantly above average performance is in essence borrowing returns from the future, this month's forecast has been shaved back to the 5-6% range.

Related Articles & Posts

100 Years of Stock Market History: Includes 100-year chart and discussion of the long flat periods.
Dow Yearly Returns: 1929-2010 : bar graph of yearly total returns (i.e., including dividends)
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.
Three Scenarios for the Economy (and the stock market) includes links to additional relevant articles by Bill Gross, Nouriel Roubini, Jeremy Grantham, John Hussman, and others.
For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the menu bar at the top.
Copyright © 2011. Last modified: 12/1/11