Observations: March 2012 Stock Market Update

Sunday, April 1, 2012

March 2012 Stock Market Update

Dow Index Monthly Closes Through March, 2012

Dow Approaching All-Time High

Well, maybe I'm a touch premature, but consider this.... the Dow set another 52-week and multi-year high on March 15. To top this high, you'd have to go all the way back to 2007 -- back to early in the descent from the all-time peak established on October 9 of that year. That shows you how far we have come in the three short years since the market bottomed in March of 2009. The Dow has more than doubled since its lows of 2009, and is now
less than 1,000 points and 7% from its all-time high.

Bond yields ticked up, with the 10-year Treasury starting the month with a yield of 2.03%, and ending at 2.23%. Apparently, this increase was too modest to frighten the stock market (or to bring much joy to bond investors!).

The lack of volatility continued. There was only one +/-1% day, and no 2-3% days during the month. In fact, volatility has declined steadily since the fourth quarter of last year. The VIX, a measure of volatiility, ended the month at 15.5. To find a lower reading than that, I had to go all the way back to ... 2007 -- before the market peaked. Let's hope that's just a coincidence.

The DJIA (Dow Jones Industrial Average) finished the month at 13,212.04, up 8.1% for the quarter, and with a dividend yield of 2.47%. (See chart above. Click to expand.)

Where are we Now? March, 1st Quarter & 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 952 points (6.7%)
From Crash Low of 6547 on March 9, 2009: Up 6665 points (101.8%)
From one year ago close of 12,320 in March, 2011: the Dow is up 892 points (7.2%)
From the New 52-Week High of 13,253 on March 15, 2012: down 41 points (0.3%)
From the 52-Week Low of 10,655 on October 3, 2011: Up 2557 points (24.0%)
First Quarter & Year-to-Date From 2011 close of 12,218: The Dow is up 994 points (8.1%)
From Prior Month Close of 12,952: Up 260 points (2.0%)

For other recent results, see 2011 End-of-year stock market results, February 2012 stock market results, and April 2012 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 100% since then and still be below the all-time high, see The Importance of Avoiding Large Losses.

The Next 10 Years

My stock market projection model continues to project below average 10-year returns. The 2012 preliminary 10-year projection is in the neighborhood of 4.5%/year. Since the model is earnings based, I'll have to wait for official 2011 earnings data before finalizing the projection. I expect to post a formal update later this month.