Sunday, July 1, 2012

June 2012 Stock Market Update

Stock market (DJIA) monthly performance / closing prices for last 12 months
Dow Index Monthly Closes Through June, 2012

A Disappointing Second Quarter

June was actually a pretty good month.  On the final day of trading, the Dow was up 2.2%, rallying on good news from Europe.  However, it marked the end of a disappointing second quarter.  The market fell 2.5% during the quarter, primarily because of concerns about a) Europe, b) China, and c) the U.S. -- three of the most important drivers of the global economy.

An emerging domestic concern lately is the so-called "fiscal cliff" looming on
the horizon.  Congress' budget agreement last summer stipulated severe cuts in U.S. government spending and higher tax rates beginning in 2013.  That's a double whammy that could bring an already wobbly economy to its knees -- unless Congress reconsiders. Most think they will; but, who knows....

The DJIA (Dow Jones Industrial Average) closed at 12,880.09, up 3.9% for the month, but down 2.5% for the quarter (see chart above. Click to expand).  The dividend yield closed at 2.6%. 

Where Are We Now? June, 2nd Quarter, 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 1284 points (9.1%)  
  • From Crash Low of 6547 on March 9, 2009: Up 6333 points (96.7%)
  • From one year ago close of 12,414 in June, 2011: the Dow is up 466 points (3.8%)
  • From the 52-Week Low of 10,655 on October 3, 2011: Up 2225 points (20.9%)  
  • Year-to-Date From 2011 close of 12,218: The Dow is up 663 points (5.4%)  
  • 2nd Quarter From March, 2012 close of 13,212: The Dow is down 332 points (2.5%)
  • From the 52-Week High of 13,279 on May 1, 2012: down 399 points (3.0%)
  • From Prior Month Close of 12,393: up 487 points (3.9%)
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 90% since then and still be nearly 10% 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 "official" 2012 10-year projection as of January was for 5.6%/year. Above average market increases early in the year caused my interim/monthly model to reduce prospective returns even more. As of mid-year, the monthly model estimates returns of around five and a half percent per year.

Related Articles & Posts

100 Years of Stock Market History: Bigger perspective on "Where are we Now?." Includes 100-year chart and discussion of the long flat periods.
Dow Yearly Returns: 1929-2011 : 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
Where Are Interest Rates Headed? My methodology & spreadsheet for forecasting interest rates.
Who's Afraid of a Sideways Market?: Interesting perspective on long flat periods from Morningstar.
CBO report warns of U.S. falling off 'fiscal cliff' from USA Today.
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: 8/2/2012

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