DOW - Rallies and Corrections Statistics over 100 years.
Using the Dow Industrials index.
Dow could reach 100,000 in 2045 but in the next 5 years the question remains as to a possible sharp/ final correction to complete the last 15y flat trading (inflation adjusted).
Conclusions:
- Over the last 100 years, I did not find a period of more than 4 years without a correction of 20% or at least a period of flatness of at least 1 year (correct me if I am wrong).
- In 2016, the risk of a period of correction (be it flat in a band of 20%) is relatively high and there is a possibility it goes much deeper (40/60%)
- The longest streak of positive years was 9 years in 1991 (2 to 5 years being the norm). We are currently in year 7 if this year is positive.
- 67% of years were positive.
Please tell me in which scenario you believe in on the chart below: (1), (2), (3) or (4)?
Facts (rough measures/done manually):
1) In the long run, Equity Indices tend to go up (Fittest selection in the index – Monetary Base Inflation – Smart Management Input) – In case of doubt, in a non leveraged fashion, better be long. Period.
2) Long term rate of appreciation is 7.5% (ex dividend/non inflation adjusted, call it 7.5% inflation adjusted ex dividend).
3) The longest rally without any major correction lasted 7 years from 1991 to 1998 (no correction larger than 14% and 94 was flat)
4) Including corrections no larger than 20% (generally 2) and no longer than a few quarters, there were 2 major rallies of 11y and 13y (49/62 and 87/00).
5) Including corrections no larger than 20% (many) and sometimes flat for many quarters, there were 2 major rallies of 24y and 18y (42/66 and 82/00). Items (4) and (3) are within this.
6) 15 Sharp rallies have lasted less than 8Y (with 20% corrections within).
2 x 8Y
1 x 6Y
3 x 5Y
2 x 4Y
6 x below 3y
7) There were 24 corrections of 20% or Long enough in time to be relevant (one every 4 years on average).
8) List of 10 biggest corrections (chronologically):
1 – 1923 – 20% - 3m
2 – 1926 – 20% - 3m
3 – 1929/32 – 90% - 3y
4 – 1932 – 40% - 6m
4 – 1937/42 - 50% - 5y (WWII)
5 – 1946/49 – 25% - 3y
6 – 1961 – 31% - 6M
7– 1968/79 – 38% - 2y
8 – 1973/75 – 45% - 2y
9 – 1976/82 -30% - 6y (the longest – High inflation – Very punitive but subsequent explosion until 1987… well 2000 actually)
10 – 1987 – 40% - 3M (the shortest and most remembered because out of the blue for non technical people)
11 – 1990 -25% - 3m
12 – 1998 – 20% - 3m
13 – 2000/03 – 40% - 3y
14 – 2007/09 – 54% - 2y
15 – 2010 – 20% - 3m
16 – 2011 – 20% - 3M
9) There were 13 flat corrections where the market remained in the same are for 1/2 years.
10) Time wise, There were 3 periods where the market did not make much progress in a very large band for an extend period.
1) 1929-1954 – 25Y
2) 1966 – 1982 – 16Y
3) 2000 – 201X – 15y so far (was it over in 2009 or are we in for a 3rd dive of 40/70% again?)
11) In terms of asymptotic move initiation: 1995 and 1996 were really special years (outliers). Surprising although 1994 was a clear buy signal after 1 year correction (super clean on DAX).
12) Over the last 90 years, I did not find a period of more than 4 years without a correction of 20% or a period of flatness of at least 1 year.
13) 67% of years were positive
14) The longest streak of positive years was 9 years in 1991 (2 to 5 years being the norm). We are currently in year 7 if this year is positive.
Dow could reach 100,000 in 2045 but in the next 5 years the question remains as to a possible sharp/ final correction to complete the last 15y flat trading (inflation adjusted).
Conclusions:
- Over the last 100 years, I did not find a period of more than 4 years without a correction of 20% or at least a period of flatness of at least 1 year (correct me if I am wrong).
- In 2016, the risk of a period of correction (be it flat in a band of 20%) is relatively high and there is a possibility it goes much deeper (40/60%)
- The longest streak of positive years was 9 years in 1991 (2 to 5 years being the norm). We are currently in year 7 if this year is positive.
- 67% of years were positive.
Please tell me in which scenario you believe in on the chart below: (1), (2), (3) or (4)?
Facts (rough measures/done manually):
1) In the long run, Equity Indices tend to go up (Fittest selection in the index – Monetary Base Inflation – Smart Management Input) – In case of doubt, in a non leveraged fashion, better be long. Period.
2) Long term rate of appreciation is 7.5% (ex dividend/non inflation adjusted, call it 7.5% inflation adjusted ex dividend).
3) The longest rally without any major correction lasted 7 years from 1991 to 1998 (no correction larger than 14% and 94 was flat)
4) Including corrections no larger than 20% (generally 2) and no longer than a few quarters, there were 2 major rallies of 11y and 13y (49/62 and 87/00).
5) Including corrections no larger than 20% (many) and sometimes flat for many quarters, there were 2 major rallies of 24y and 18y (42/66 and 82/00). Items (4) and (3) are within this.
6) 15 Sharp rallies have lasted less than 8Y (with 20% corrections within).
2 x 8Y
1 x 6Y
3 x 5Y
2 x 4Y
6 x below 3y
7) There were 24 corrections of 20% or Long enough in time to be relevant (one every 4 years on average).
8) List of 10 biggest corrections (chronologically):
1 – 1923 – 20% - 3m
2 – 1926 – 20% - 3m
3 – 1929/32 – 90% - 3y
4 – 1932 – 40% - 6m
4 – 1937/42 - 50% - 5y (WWII)
5 – 1946/49 – 25% - 3y
6 – 1961 – 31% - 6M
7– 1968/79 – 38% - 2y
8 – 1973/75 – 45% - 2y
9 – 1976/82 -30% - 6y (the longest – High inflation – Very punitive but subsequent explosion until 1987… well 2000 actually)
10 – 1987 – 40% - 3M (the shortest and most remembered because out of the blue for non technical people)
11 – 1990 -25% - 3m
12 – 1998 – 20% - 3m
13 – 2000/03 – 40% - 3y
14 – 2007/09 – 54% - 2y
15 – 2010 – 20% - 3m
16 – 2011 – 20% - 3M
9) There were 13 flat corrections where the market remained in the same are for 1/2 years.
10) Time wise, There were 3 periods where the market did not make much progress in a very large band for an extend period.
1) 1929-1954 – 25Y
2) 1966 – 1982 – 16Y
3) 2000 – 201X – 15y so far (was it over in 2009 or are we in for a 3rd dive of 40/70% again?)
11) In terms of asymptotic move initiation: 1995 and 1996 were really special years (outliers). Surprising although 1994 was a clear buy signal after 1 year correction (super clean on DAX).
12) Over the last 90 years, I did not find a period of more than 4 years without a correction of 20% or a period of flatness of at least 1 year.
13) 67% of years were positive
14) The longest streak of positive years was 9 years in 1991 (2 to 5 years being the norm). We are currently in year 7 if this year is positive.