Thursday, November 1, 2012

October 2012 Stock Market Performance

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

Sandy Closes Markets

The big news this month was Sandy, this year's "storm of the century."  Not only did this devastating storm steal the headlines from the upcoming election, she closed the stock market.  The markets were closed this past Monday and Tuesday, the first two-day weather-related closure since the late 1800s.

Early in the month the Dow established a new 52-week high.  At this point, any new 52-week high is also an approximately-five-year high since to find higher closes you will have go to back to the fall of 2007 -- just following the October 9, '07 all-time high. However, overall, the month was a downer -- though only the second such month in the past year.

The DJIA (Dow Jones Industrial Average) closed October at 13,096.46, down 2.5% for the month (see chart above. Click to expand). The Treasury's ten-year constant maturity rate ended the month at 1.72%.

Oh, the election?  With less than a week to go until election day, it's as close to a dead heat as I have ever seen. Partly as  result, there seems to be less pre-election portfolio repositioning than there typically is.

Where Are We Now? October 2012, Year-to-date, and Recovery-To-Date Results

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 1068 points (7.5%)  
  • From Crash Low of 6547 on March 9, 2009: Up 6549 points (almost exactly 100.0%)
  • From one year ago close of 11,955 at end of October, 2011: the Dow is up 1142 points (9.5%)
  • From the 52-Week Low of 11,232 on November 25, 2011: Up 1865 points (16.6%)  
  • Year-to-Date From 2011 close of 12,218: The Dow is up 879 points (7.2%)  
  • From the 3rd Quarter Close of 13,437: down 341 points (2.5%)
  • From Prior Month Close of 13,437.13: down 340.7 points (2.5%)
  • From the new 52-Week High of 13,610 set on October 5, 2012: down 514 points (3.8%)
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 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 October, 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.
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