Observations: End of April 2011 Stock Market Update

Sunday, May 1, 2011

End of April 2011 Stock Market Update

April, Quarter-To-Date, Year-To-Date & Recovery-To-Date Review

After taking a month off, the market resumed its another-month-another-52-week-high advance. In fact, for the fourth of the last five months the market set a multi-year high -- this time besting levels last seen in 2008. All this while shrugging off yet another bit of bad news.

Last month, the Japanese earthquake, tsunami and near nuclear meltdown caused the market to "hiccup," and, ultimately cost it a chance to reach a multi-year high for the fourth month in a row. This month, the market received news that S&P, while continuing to rate U.S. debt as AAA, had changed the outlook for our debt from "Stable" to "Negative" -- for the first time in history. Not surprisingly, the market again "hiccupped" -- falling to
12,094 intraday and 12,202 at the close on April 18.

However, again, Not to worry! In the face of news that in less confident times might have been a good excuse for who knows what, the market came roaring back. The DJIA (Dow Jones Industrial Average) ended the month at a multi-year high of 12,810.54.

Here's where we stand after this remarkable 2-year+ run:

From Prior Month Close of 12,320: The Dow is up 491 points (4.0%)
From 1st Quarter Close of 12,320: The Dow is up 491 points (4.0%)
From December, 2010 Close of 11,578: The Dow is up 1233 points (10.7%)
From Recent Low of 9986 on August 26, 2010: Up 2825 points (28.3%)
From 52-Week Low of 9686 on July 2, 2010: Up 3124 points (32.3%)
From Crash Low of 6547 on March 9, 2009: Up 6264 points (95.7%)!

Note: For other recent results, see March stock market results, May stock market results, and 2010 stock market stats with 100-year chart.

Next Steps??

Just to reinforce how powerful the advance has been since the end of August when the market began anticipating that QE2 might be in our future, consider this. The annualized return since then has been over 40%.

There's only one remaining hurdle. We're amazingly close to recovering all the way back to the all-time high.

From All-Time High of 14,164 on Oct 9, 2007: the Dow is down 1354 points (9.6%)

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 95% and still be 10% below the all-time high, see The Importance of Avoiding Large Losses.

The Next 10 Years

A key question in is whether these advances are sustainable; will they be enduring -- or only temporary? 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 has likely reduced future prospects somewhat; my preliminary 2011 10-year projection was in the neighborhood of 4.7%. Since my model is earnings based, I had to wait for 2010 earnings data before finalizing the projection. I expect to post a formal update later this month.

100 Years of Stock Market History: Includes 100-year chart and discussion of the long flat periods.
Dow Yearly Returns: 1929-2010 : 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.
For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left.
This work is licensed under a Creative Commons Attribution 3.0 unported license. Last modified: 6/2/2011