Yet another look (see prior takes here and here) at the concept of market cycles. The past century  shows alternating Bullish and Bearish phases, secular periods each lasting for an extended time (between 10 to 20 years).
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Dow Jones Industrials, 1903 – 2004

100_year_dow_rydex

Note that markets are up slightly for 2005 since this chart was completed.

A few minor comments about this chart:  To be fully accurate, the post 1929 period — starting from 1934 or so — was mostly positive, if for no other reason than the crash brought the market to such a low level by 1932. If one bought and held then — perhaps the equivalent of Summer 2002 — one did quite well. Of course, almost nobody did.

And I would start the post-war period in either 1944 or 1946, making the post WWII rally more like 20 years than 11.

But these are mere quibbles — the key point is that markets go through long secular cycles. Following the 18 year Bull market from 1982-2000, it would be unprecendented to see a mere 2 year Bear Market followed by a multi year, decade long Bull Market.

Instead, History implies a rangebound period of cyclical rallies and selloffs, lasting for quite a long time.

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Source:
Investing —More of a Challenge
Rydex Funds

http://www.rydexfundsfp.com/pdf/ium_6pager.pdf

Category: Economy, Investing, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “Market Cycles: 100 Year DJIA”

  1. spencer says:

    You ought to overlay a long term history of the stock market PE on this data. It follows long secular ( 20 or so years) swings from below 10 to over 20 and back to under 10. We are now in one of those long secular declines in the market PE.

  2. No Coattail Ride in the Near Future

    When the stock market surges (when there is a Bull Market) may people make money just because they are swept up in the market surge. When there is a Bear Market (a market in which sellers outnumber buyers) it is

  3. Spencer — we did that last month:

    http://bigpicture.typepad.com/comments/2005/08/dow_jones_chart.html

    Its shows most of the gains in a bull market are the product of P/E mulitple expansion, rather than mere earnings gains

  4. Ed Hamilton says:

    Dominant historical reality is the (proactively well-ignored) ‘severe roller-coaster’ on a 3.5 decade time scale:

    “the compelling Real DJIA, 1924-now” at
    http://homepage.mac.com/ttsmyf
    “the 3 Fed Chair warnings, Real DJIA” at
    http://homepage.mac.com/ttsmyf/3warnsRD.html

  5. Ed says:

    Dominant historical reality is the (proactively well-ignored) ‘severe roller-coaster’ on a 3.5 decade time scale:

    “the compelling Real DJIA, 1924-now” at
    http://homepage.mac.com/ttsmyf
    “the 3 Fed Chair warnings, Real DJIA” at
    http://homepage.mac.com/ttsmyf/3warnsRD.html

  6. Garfield says:

    please add me to your mailing list.

  7. Scott Brooks says:

    Considering the recent stock market action,
    the chart looks downright scary!