Skip to main content

Sound Advice: January 12, 2022

Dow Jones Industrial Average: Up 62 times in 48 years

From the low of 577.60 on December 6, 1974, the Dow Jones Industrial Average has advanced by more than 60 times.  Thanks to the OPEC oil embargo of that time (the first of two), a contraction of the U.S. GDP, and interest rates climbing into the teens, the leading market averages dropped more than 45% from January, 1973 to the closing weeks of 1974.

Is the current situation similar?

Hardly.  Oil supplies are plentiful.  Energy sources other than fossil fuels are becoming more important.  Economic activity, although still constrained by supply disruptions, is brisk and likely to accelerate.  Interest rates remain near historic lows and even with probable increases over the next few years they will stay below levels that had prevailed over many decades.

Yes, stock valuations have been high, but in the absence of a trigger event that could derail the ongoing progress of the corporate community, the parade of negative thoughts often engendered by market retrenchment must be dismissed.  We breathe in and out and so does the market.

When clouds appear over Wall Street, the doomsday prophets begin their periodic end-of-the-world rants.  If a pullback signals the end of times, so be it.  But that has never been a good bet.  Witness the aftermaths of World Wars I & II, the Korean War, the Kennedy Assassination, the Vietnam War, the OPEC oil embargoes, 1980’s hyperinflation, and a host of other events that scared, but did not stop, the market’s forward progress.  This time’s no different.

As always, from the start of the time when market values have been measured, the prevailing trend has been up.  But the path is always marked by slippage along the way.  As I’ve pointed out before, intra-year pullbacks of 10% to 15% are the rule, not the exception.  What are rare are advances that continue over periods of years with nary a backstep, though that’s largely what we’ve experienced recently.

Watch the climate, not the weather.


N. Russell Wayne, CFP

Sound Asset Management Inc.

Weston, CT  06883

203-222-9370

www.soundasset.com

www.soundasset.blogspot.com

Any questions?  Please contact me at nrwayne@soundasset.com 

Comments

Post a Comment

Popular posts from this blog

Sound Advice: January 3, 2025

2025 Market Forecasts: Stupidity Taken To An Extreme   If you know anything about stock market performance, you can only gag at the nonsense “esteemed forecasters” are now putting forth about the prospective path of stocks in the year ahead.   Our cousins in the UK would call this rubbish.   I would not be as kind. Leading the Ship of Fools is the forecast from the Chief Investment Strategist at Oppenheimer who is looking for a year-end 2025 level for the Standard & Poor’s Index of 7,100, a whopping 21% increase from the most recent standing.   Indeed, most of these folks are looking for double-digit gains.   Only two expect stocks to weaken. In the last 30 years, the market has risen by more than 20% only 15 times.   The exceptional span during that time was 1996-1999, which accounted for four of those jumps.   What followed in 2000 through 2002 was the polar opposite: 2000:      -9.1% 2001:     -11.9% ...
Post a Comment
Read more

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts   Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47%   Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12%                 annual growth when the reality is closer to 6%.   This overoptimism can                 lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news.   Anal...
Post a Comment
Read more

Sound Advice: October 12, 2022

More Pain Ahead? It’s been a difficult year for the investment markets, but tough times have happened before and they will certainly happen again.   Sometimes recoveries are relatively quick and sometimes a hefty dose of patience is required.   No two downdrafts are alike, but the net result is always a rebound to even higher levels than seen before. One of the most uncomfortable stretches over the last half century took place during the oil embargo days of the early and mid-1970s.   Market valuations fell to the high single digits, a level that was about half the historic average.   For investors, this was one of the great sales of all time.   Those who had the courage to get aboard reaped huge rewards. More recent pullbacks of note took place during the dot.com days of the turn of the millennium and the banking crisis of 2008-9.   The former period was marked by what appeared to be investors’ absolute indifference to longstanding measures of reasona...
Post a Comment
Read more