January: Expect Gains

Happy New Year! If market history is any guide, 2009 should begin on a good note.

We analyzed the DJIA going back to 1900 and looked for years where the index was down 20% or more. Surprisingly there were only 11 instances including 2008; and only one that occurred after World War II! Below we highlight a month-by-month picture of the years following those nasty declines. In every year but one the market has gained for an average price return of 4.07% (January, 1904 the Dow was unched; this was counted as a gain for the purposes of the chart).

Results vary for the following months; although there is a generally positive bias for the year.

Comments

[discov:]

I think it's funny that you counted a unchanged as a gain.
concisetrading.blogspo.../
Ryan

Jan 02 03:44 PM

[igggy:]

Well, the market went up 3% today so we only have another 1% to go higher. Not very promising.

Jan 03 01:51 AM

[sleepless_o...:]

nayr - - -

After a 20%+ down year, unchanged for a month feels like a gain.

dtv999 - - -

I am thinking like you. I'm not that excited about a 3-day rally on low volume when many heavy hitters were on vacation. But then, bull markets feed on skeptics - they eat us for breakfast, lunch and dinner.

tickersense - - -

Good research and article. You might have improved your conclusion by mentioning the reliability of using past performance based on eleven samples. What is the confidence level?

Jan 03 09:04 AM

[abetterplace:]

Good article. I will take a 4% monthly gain anytime. I am afraid though that you ruined the gloomsayers thought chain. I certainly hope all the shorters get their due pay. Go America!! and God Bless the USA.

Jan 03 09:17 AM

[1977°C:]

It is more likely that market will be up 3% for a day than for a month, the atomic bomb already fell on all the major trading pits and traders like rats become pennyless overnight but human emotions of greed,fear and pressure still exist and markets will continue to jump like YOYO with the downward trend for the next,well,6 years if not 11.
Sell the dead cat's rally, market is dead.

Jan 03 01:21 PM

[ebworthen:]

"Dow was unched..." proofread please....unchged would be shorthand, "unched" sounds like hunchback or homunculus, though it does describe the DOW 2008.

The big crashes tend to recover a little 6 months after, or in March a year or two after they happen.

I'll wait until this March, May at the latest, and get out.

We're headed for DOW of 5500-6000 within the next two years as things deteriorate.

We'll come up on perceived "value" and Obama optimism, then as reality sets in it will be an agonizing grind downwards for 2-3 years with the DOW not regaining 14,000 for 20-25 years.

Jan 03 02:05 PM

[tecino:]

yesterdays gain is ALL about window dressing. manages need to get back in the game but didn't want to have big losers on their 12/31 reports.

Jan 03 06:31 PM

[Moon Kil Woong:]

Sorry I must say, just getting Bush Jr, Bernake, and Paulson out of power makes me feel a world better. It is not clear Obama and his financial team will be good or bad but that is better than an obviously bad choice.

Sorry bush Jr. but I give you an F- but a note attacked saying you apparently tried to do your best while on vacation more than any president in history.

AWOL in the military should have been a signal that you would do the same as President. Bankrupting your oil company should have been a sign you could bankrupt the nation. So we the electorate are not fully off the hook for the blame. We should have known we were buying damaged goods from the start...

Jan 04 03:06 AM

[Eze.:]

Let us wait and see what Obama and his financial team has in stock for us. One thing I know, which is not a news anyway, is that the American economy has been battered, and is begging to be rescued. If Obama can do this, it will be a welcome development.

Jan 04 11:08 AM