Read it here first: the 100-year Dow Chart

Barron’s Up & Down Wall Street column runs one of our favorite long term looks at the markets over the past 100 years, below.

We’ve run this chart so many times we are on the verge of becoming repetitive, showing it here, here, and here, and of course, at the Cult of the Bear series (part II) at the

click for larger graphic



Perhaps now that Barrons Up & Down Wall Street has run it, the concept may be perceived as less  ridiculous than it has up until now.

Here’s Mike Santoli’s take:

"Something about the larger environment might be at work, too. As the chart nearby shows, we are about six years beyond the peak of the last bull market, long enough for investors to feel they’ve paid their dues and are owed some easy profits.

Yet reminders of the fragility of the gains mustered haven’t been handled smoothly. Not to spoil anyone’s fun, but the three earlier periods that followed huge secular bull markets lasted from 16 to 25 years, in which bull and bear markets came and went but little progress was made. Yes, it could be different this time. Make that bet only after looking at the chart.

There are societal parallels to Wall Street’s mood, a more general sense of unease: The aggregate economic numbers are presented as strong, yet public surveys show plenty of economic insecurity. Unemployment figures are low, yet there is vociferous political support for harsh immigration measures. Cheap imports sustain America’s consumption habit, but protectionist sentiment’s growing.

Opportunists rightly view this sort of diffuse anxiety as a reason to turn more positive. On a near-term basis, leaning into the gathering public discomfort could well prove correct, and be rewarded with a nifty little bounce in the market and/or a sequence of more encouraging economic figures. This would reinforce the glass-half-full perspective.

For such a play to be more than a trade, however, it will have to become evident that all this anxiety is misplaced, not that there’s an emerging sense of foreboding auguring a less-generous environment."

My only caveat is that the post-1929 environment, the next Bull market can be dated starting from around 1942. So while it did take 25 years to get back to breakeven from pre-1929 crash levels, its inaccurate to describe the post 1929 period as 25 years of flat trading — its more like 17, as investors saw a strong upward bias from 1942 forwards.

That Rydex chart is a bit flawed, and its why I created my own improved version for the  Technical studies in the Cult of the Bear.

100 Year Chart , DJIA
click for larger graphic

The post Bull/Crash refractory period (as I like to call it) has been shown by a variety of studies — I recall one by Ned Davis — typically last about 2/3rds as long as the prior Bull market lasted. That suggests this period should end sometime around 2012.


The Wrong Guy
Barron’s June 12, 2006

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