Observations: February 2011 Stock Market Update

Tuesday, February 1, 2011

February 2011 Stock Market Update

January & Recovery-To-Date Review
Note: click here for February data

The market is off to an auspicious start -- which usually bodes well for the year. In January, the market again set not only a new 52-week high, but a multi-year high as well. The DJIA (Dow Jones Industrial Average) closed January at 11,891.93, just below its high for the month of 11,989.83 set on January 27th. That peak appears to be the highest close since June 17, 2008 -- the last time the market closed above 12,000.

The market is going full speed ahead. It spent the end of January knocking at the door of 12,000. For five days in a row, the market peaked above 12,000 only to fall back before the close. Here's how the January close stacks up against some benchmark earlier closes:

From December/EOY Close of 11,578: The Dow is up 314 point (2.7%)
From Recent Low of 9986 on August 26, 2010: Up 1906 points (19.1%)
From 52-Week Low of 9686 on July 2, 2010: Up 2205 points (22.8%)!
From Crash Low of 6547 on March 9, 2009: Up 5345 points (81.6%)!!

(This just in... I'm actually writing this on February 1. The market finally broke through 12,000 -- quite convincingly; it closed today at 12,040.)

Note: For a summary of last year's performance, see 2010 Year-End Stock Market Update

One Remaining Hurdle
There is one benchmark that remains unsurpassed -- the all-time high.

From All-Time High of 14,164 on Oct 9, 2007: the Dow is still down 2273 points (16.0%)

Note: For an explanation of how the Dow can be up over 80% and still be 16% below the all-time high, see The Importance of Avoiding Large Losses.

The Next 10 Years
In the first quarter of last year, my stock market projection model projected 10-year returns in the neighborhood of 5.5%. Last year's above-trend performance will reduce future prospects somewhat; my preliminary 10-year projection is in the neighborhood of 4.7%. Since my model is earnings based, I'll have to wait for 2010 earnings data before finalizing the projection. I'll post a formal update around the end of the quarter.

100 Years of Stock Market History: Includes 100-year chart and discussion of the long flat periods.
Dow Yearly Returns since 1929 : 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
Who's Afraid of a Sideways Market?: Interesting perspective on long flat periods from Morningstar.
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This work is licensed under a Creative Commons Attribution 3.0 unported license. Last modified: 3/1/2011