Observations: June 2012 Stock Market Update

Sunday, July 1, 2012

June 2012 Stock Market Update

Stock market (DJIA) monthly performance / closing prices for last 12 months

Dow Index Monthly Closes Through June, 2012

A Disappointing Second Quarter

June was actually a pretty good month. On the final day of trading, the Dow was up 2.2%, rallying on good news from Europe. However, it marked the end of a disappointing second quarter. The market fell 2.5% during the quarter, primarily because of concerns about a) Europe, b) China, and c) the U.S. -- three of the most important drivers of the global economy.

An emerging domestic concern lately is the so-called "fiscal cliff" looming on
the horizon. Congress' budget agreement last summer stipulated severe cuts in U.S. government spending and higher tax rates beginning in 2013. That's a double whammy that could bring an already wobbly economy to its knees -- unless Congress reconsiders. Most think they will; but, who knows....

The DJIA (Dow Jones Industrial Average) closed at 12,880.09, up 3.9% for the month, but down 2.5% for the quarter (see chart above. Click to expand). The dividend yield closed at 2.6%.

Where Are We Now? June, 2nd Quarter, Year-to-date & Recovery-To-Date Review

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 1284 points (9.1%)
From Crash Low of 6547 on March 9, 2009: Up 6333 points (96.7%)
From one year ago close of 12,414 in June, 2011: the Dow is up 466 points (3.8%)
From the 52-Week Low of 10,655 on October 3, 2011: Up 2225 points (20.9%)
Year-to-Date From 2011 close of 12,218: The Dow is up 663 points (5.4%)
2nd Quarter From March, 2012 close of 13,212: The Dow is down 332 points (2.5%)
From the 52-Week High of 13,279 on May 1, 2012: down 399 points (3.0%)
From Prior Month Close of 12,393: up 487 points (3.9%)

For other recent results, see May 2012 stock market results or July 2012 stock market results.

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 90% since then and still be nearly 10% 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. Above average market increases early in the year caused my interim/monthly model to reduce prospective returns even more. As of mid-year, the monthly model estimates returns of around five and a half percent per year.