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Market Cycles: 100 Year DJIA

Posted By Barry Ritholtz On September 9, 2005 @ 6:34 am In Economy,Investing,Markets | Comments Disabled

Yet another look (see prior takes here [1] and here [2]) 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 [3]

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 [4]
Rydex Funds

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


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/09/market-cycles-100-year-djia/

URLs in this post:

[1] here: http://bigpicture.typepad.com/comments/2003/11/looking_at_the_.html

[2] here: http://bigpicture.typepad.com/comments/2005/08/dow_jones_chart.html

[3] Image: http://www.ritholtz.com/blog/wp-content/uploads/2005/09/100_year_dow_rydex.jpg

[4] Investing —More of a Challenge: http://www.rydexfundsfp.com/pdf/ium_6pager.pdf

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