Friday, February 1, 2013

January 2013 Stock Market Performance

Stock market (DJIA) monthly performance results; closing prices last 12 months through January 2013
Dow Index Monthly Closes Through January, 2013

On the Cusp!

After a relatively flat fourth quarter (actually, it was slightly negative), the market exploded into the new year. The year started with a 308 point relief rally on January 2nd, celebrating the last-minute agreement that kept us from falling off the "fiscal cliff" -- at least for a while. From there, The Dow kept going until it established a new 5-year high close of 13954 on January 29th, right on the cusp of 14,000!

News that the economy had actually contracted during the fourth quarter triggered a decline at the end of the month.  Still, the DJIA (Dow Jones Industrial Average) closed January at 13,860.58, up over 5% for the month. January's performance was the best January in almost 20 years -- since 1994. (See chart above. Click to expand.)

So, almost four years into the recovery, here we are on the cusp of 14,000 (actually as I write this, we're above 14,000 intraday).  Not only that, once we get to 14,000 we're also on the cusp of a new all-time high! Fears are abating, excitement is building. Last week, the New York Times published As Worries Ebb, Small Investors Propel Markets. Seems like as good a time as any to also link to Why Mutual Fund Owners Earn Lower Returns Than the Funds They Own(!).

Where Are We Now? January 2013 & 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 only 304 points (2.1%) ! 
  • From Crash Low of 6547 on March 9, 2009: Up 7314 points (111.7%)
  • From One Year Ago Close of 12,633 at end of January, 2012: the Dow is up 9.7%.
  • From 52-Week Low of 12,101 on June 4: Up 1759 points (14.5%)
  • From 4th Quarter/ 2012 Close of 13,104: Up 756 points (5.8%) for the year
  • From Prior Month Close of 13,104 the Dow is up 756 points (5.8%)
  • From new 52-Week High of 13,954 on January 29: we're down 94 points (0.7%)

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 model for projecting 10-year stock market returns is currently projecting 10-year returns below 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 after the end of the first quarter.

Interest Rates

U.S. Treasury constant maturity interest rates increased significantly during the month. Five year treasury yields went from 0.72% at the end of last month to 0.88% this month; ten year yields increased from 1.78% to 2.02%.  My interest rate forecasting model continues to forecast increasing rates over the next five years.  That model forecasts 1-year rates rising from the current 0.15% to 2.4% (up from 2.1% last month), and 5-year rates rising from 0.88% to 3.2% (up from 2.9% last month).

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.
Why Fund Investors Earn Lower Returns Than the Funds They Own(!): timing is everything.
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: 3/1/2013

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