Monday, October 1, 2012

September 2012 Stock Market Performance

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

Dow Inching Closer to All-Time High

As you can see from the chart above, the Dow has recouped the overwhelming majority of the losses incurred during the 2008-2009 stock market crash.

On September 6, the market jumped over 200 points to four-year highs, based upon the latest encouraging news regarding the European debt crisis.  A week later, the Fed announced new plans for spurring domestic growth -- primarily by buying mortgage-backed securities.  The intent is to boost the housing market by lowering mortgage rates even further.  The result was another 200-point day on the Dow.

Exactly a week later, the Dow closed at 13,596.93 -- not only a new 52-week high, but its highest reading in almost five years.  To find a higher reading, you have to go back to the fall of 2007, early in the decline following the October 9, 2007 all-time high.

The DJIA (Dow Jones Industrial Average) closed September at 13,437.13, up 2.6% for the month, and 4.3% for the quarter (see chart above. Click to expand). The dividend yield at month-end was 2.55%

The Treasury's ten-year constant maturity rate ended the month at about 1.65%.

Finally, the lack of volatility continued.  The two 200-point days mentioned above were the only plus or minus 1% days in the month.  The VIX, a measure of volatility, ended the month at 15.73.

Where Are We Now? September, 3rd Quarter, Year-to-date, and 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 727 points (5.1%)  
  • From Crash Low of 6547 on March 9, 2009: Up 6890 points (105.2%)
  • From one year ago close of 10,913 in September, 2011: the Dow is up 2524 points (23.1%)
  • From the 52-Week Low of 10,655 on October 3, 2011: Up 2782 points (26.1%)  
  • Year-to-Date From 2011 close of 12,218: The Dow is up 1220 points (10.0%)  
  • 3rd Quarter: From the 2nd Quarter Close of 12,880: up 557 points (4.3%)
  • From Prior Month Close of 13,090.84: up 346.3 points (2.6%)
  • From the new 52-Week High of 13,597 set on September 20, 2012: down 159.8 points (1.2%)
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 "official" 2012 10-year projection as of January was for 5.6%/year for the next 10 years. As of the end of September, my interim/monthly model estimates returns closer to 5% 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 © 2012.               Last modified: 11/1/2012

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