Click to enlarge:

Source: JP Morgan Asset Management Guide to the Markets, Q3



Here is yet another look at long term secular market. Its become one of our favorite charts because of how much it reveals about the cyclical nature of things . . .

Category: Cycles, 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.

17 Responses to “Dow Jones Industrial Average Since 1900”

  1. wally says:

    Looks like the market flattens about every 30 years; I wonder if it will also take off at thirty year intervals. It did the last two times.

  2. super_trooper says:

    Please adjust for inflation

  3. Centurion 9.41 says:

    Aside from adjusting for inflation, try plotting with a demographic plot – with a log scale on the right side.

    Then make one with a projected demographic plot going out 40 years.

    Without a type increase in productivity and capability in healthcare, the demographics are going to flatten the slope of the regression line dramatically.


    BR: You seem to have missed the point . . .

  4. lburgler says:

    It would be interesting to see this chart overlaid with rainfall shortage standard deviation data.

    I can thing of at least two periods in time during which stocks were flat and rainfall was way below average.

    I only mention that because I know that core CPI doesn’t include food. And food is actually my biggest expenditure after rent. I’m just waiting for this drought to mean that I will be cutting out the little consumer discretionarry shopping that I do…

  5. ashpelham2 says:

    As I’ve said before, and lburgler is hinting at here, there is virtually no way that the US avoids a recession late this year or early next year. A marked drop in consumer discretionary spending due to energy spikes, food spikes, all hints at a recession led by the consumer. And business is simply not moving an inch until this election is decided. Or Obamacare is repealed or watered down. I see a shorter lived recession for 2013.

  6. abatis says:

    Inflation adjustment makes the chart too boring with little improvement since the 70s. It seem like Prechter and that crowd have the cycles roughly figured out.

  7. Thomaspin says:

    Ridiculous trend line. Least squares fit would drop the angle of inclination by at least 30 degrees.

  8. Frwip says:

    Quite subjective, especially what to do of the 1929 crash in that picture, but yes, there is a 30 years-ish generational cycle, with swampy markets lasting for about 18 years (I’m considering 1929-1949 as the time it actually took to really recover sustained market growth, rather then 1937-1949).

    That’s fairly consistent with Minsky’s views of financial cycles. The slam-on-the-break phase is mostly past but the restoration of trust is still ahead, and not even started, if you ask me.

    So, see you all in … 2018 or so? May be 2016, if stars align.

  9. billybob says:

    Which investments tend to outperform in the flat periods? Any patterns?

  10. billmasi says:

    How can anyone “trust” this chart?

    (Given that the garbage is regularly thrown out of the DOW and new high-flying names added?)

    Using this historical DOW is even worse than using today’s CPI-U to compare with CPI-U pre-1980.

  11. drocto says:

    Yep, we’ve got about 3 – 7 years left on the horizontal ride with a good cyclical bear market for good measure. Maybe we’ll even got some symmetry on the chop with the next bear getting down to about 800 to match the 2002 lows. If that happens in 3-7 years it should establish enough of a base with P/E ratios properly down to a level from which a secular bull can emerge beginning in roughly 2020.

  12. drocto says:

    Thomaspin, regarding the “trendline” I don’t think the author intended it to be one.

    To me it looks like a quick attempt to roughly connect earlier peaks (1906, 1929, 1966) with today’s price. This emphasizes that today’s prices are roughly on trend with prior PEAKS in the market. It’s crude but interesting.

  13. [...] JP Morgan Asset Management Guide to the Markets, Q3 via The Big Picture Blog dow, investBIT, keyBIT, [...]

  14. rahuldeodhar says:

    Before anything else, I must highlight that the average line for 1937-49, 1966-82 and 2000- present are drawn wrong. They have a positive bias. 1906-24 seems to have a negative bias.

    More importantly, we seem to have ~20 years of stability and ~20 years of secular bull runs. By that measure, somewhere after 2015 we will see the start of the next bull run.

    Instead of the blue line being a straight line, they should have drawn an exponential curve. First an exponential curve is better fit than the line. It also tallies with increasing pace of development and growth over the period. Second it indicates that we might be in for a substantial up move as we seem to have deviated quite a bit from the curve mean.

    But we must correlate these with actual developments. If you draw some key developments on the charts we will see better picture.

    Periods of technology development: 1930s and 1940s period signifies the development of US highways and railroad. This is phase where Americans were still exploring new frontiers within their country.
    #)Similarly 1966-82 period was time when computing technology was taking shape.
    #) Similarly, 2000- present internet technologies are taking root.

    Productivity increase periods. These periods are different from technology development periods. Here known technologies are being exploited to create new thresholds for efficiency and productivity. Concurrently, new technologies are being incubated but those are not the dominant forces as yet.
    #) 1949 onwards was post war reconstruction. Here known things were required to be produced in ever increasing numbers to satisfy the demand in Europe and Americas itself.
    #) 1982 till 2000 was a period when IT came of age. Computing allowed wider management control, better designs, higher efficiency etc.


  15. rahuldeodhar says:

    My comment about exponential line is wrong. Graph is in log scale and hence it is exponent. – Rahul

  16. gregory barton says:

    I publish similar charts for the Dow and the S&P on my website The charts show supports and resistances and average annual compound growth. Reversion to the mean for the Dow is the same as that of your chart. For the S&P500 reversion to the mean would take the index to around 1,700.

  17. gregory barton says:

    The charts are on this page: