Tuesday, January 1, 2013

2012 Stock Market Performance: End-of-Year Update

Kick The Can

Faced with the potentially catastrophic "fiscal cliff," our law-makers finally swung into action and rode to the rescue. Well, sort of. Congress continued to abide by their "We will solve no problem before its time" -- or, maybe a little after its time -- philosophy. So, an hour or two after the midnight, end-of-year deadline, the Senate finally passed legislation designed to avert the "fiscal cliff" disaster. Assuming the house agrees, and soon, we can all relax.

Well, sort of. Following the new global approach to solving problems, what the Senate really did was kick the can down the road. They raised taxes on those earning more than $250,000. However, as far as cutting expenses goes, they took their cue from Scarlett O'Hara; they'll think about it later. (The draconian spending cuts were simply postponed for two months.)

As a result, 2013 promises to bring us a seemingly unending series of ____ing contests: on raising the debt ceiling again (which is where this all started), the federal budget, and, two months from now, renewed fighting over spending cuts.

2012 Monthly Stock Market Closes Through Year-End

Stock market (DJIA) 2012 monthly closing prices thru year-end
Dow Index Monthly Closes Through December, 2012

December, 4th Quarter, Year-To-Date & Recovery-To-Date Review

Two of the three major U.S. equity indexes posted double-digit gains in 2012.  The DJIA (Dow Jones Industrial Average) brought up the rear, closing the year at 13,104.14. Here are some key market stats.

  • From Prior Month Close of 13,026 The Dow is up 79 points (0.6%)
  • From 52-Week High of 13,610 on October 5: we're down 506 points (3.7%)
  • From 3rd Quarter Close of 13,437: Down 333 points (2.5%)
  • From 52-Week Low of 12,101 on June 4: Up 1003 points (8.3%)
  • From 2011 Close of 12,218: Up 887 points (7.3%) for the year
  • From Crash Low of 6547 on March 9, 2009: Up 6557 points (100.2%)
  • From All-Time High of 14,165 on Oct 9, 2007: the Dow is still down 1060 points (7.5%)  
For other related results, see January 2013 stock market results, November 2012 stock market results, and 2011 Year-End Update.
For total return info (i.e., including dividends) see Stock Market Total Returns 19xx-2012. 

The year-end dividend yield was 2.7%.  Ten-year Treasury Notes ended yielding 1.78%. The Dow 25-year moving average ended at 8188.

S&P and Nasdaq Year-end Closes

To complete the picture, for the year-end post let's take a look at a couple of other key indexes:
  • S&P 500: closed 2012 at 1426, up 13.4% for the year, and only 8.9% off its all-time high close of 1565 set October 9, 2007
  • Nasdaq: closed 2012 at 3020, up 15.9% for the year, -- but, still 40% off its all-time high close of 5049 set March 10, 2000. Almost 13 years later, we're still not in sight of the highs set during the dot-com era!
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 5-10 Years

My model for projecting 10-year stock market returns is currently projecting 10-year returns in the neighborhood of 5.5%.  Since my model is earnings based, this is a preliminary number. I'll have to wait for 2012 earnings data before finalizing the projection.  I'll post interim updates monthly, and the "official" update around the end of the first quarter.

My interest rate forecasting model continues to forecast increasing rates over the next five years, with 1-year rates rising from the current 0.16% to 2.1%, and 5-year rates rising from 0.72% to 2.9%.

Related 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: 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 The most recent "official" projection. Comparison of projections to actuals
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.
For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.
Copyright © 2013                    Last modified: 2/2/2013

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