After 2008, Are We Due for an Up Year?

This has been a year that the old adages like "Sell in May and Go Away" or September is the worst month for market performance did not hold true. Some attribute this to the fact the market simply overshot on the downside in March.

In line with these adages, the market's performance in the year following big down years has generally been strong. Courtesy of Chart of the Day, the following chart notes the market's performance tends to be strong in those years following the years where the market declined significantly. As the chart notes, the exceptions were the early 1930's and 1978.

The below chart presents the performance of the Dow for the calendar year following the 15 worst calendar year performances of the Dow since 1896. The Dow's performance during the 2008 calendar year was the third worst on record. Could there be more upside to the market as we move into the end of this year?

(click to enlarge)

Source: Chart of the Day

Comments

[Pat C:]

Of course it will be up years for 4th qtr. 2009 and 1st 3 qtrs of 2010. Mathmatically the pundits will be comparing year over year to the biggest fall since the great depression. Less bad will look like a miracle.

Oct 09 02:13 PM

[drewriders:]

I agree. I say we go higher and hit Dow 10,500 by the end of the year.
After that it is anyone's guess.

Oct 09 03:37 PM

[Wayne Freeman:]

The short term (3-6 mo) may go either way.

Regardless, this is just a delaying period before the markets decline big again. There has been too much destruction to so many elements of our economy, that any bullish move mid to long term is impossible without a wholesale repair. The housing market needs to base; the coming wave of resets in Option and Alt-A mortgages needs to pass with some relief for those affected borrowers (lower rates); banks need to clean-out toxic paper by sales or write-downs, quit hoarding TARP funds and start lending; job creation needs to begin in earnest (not by the Government sector either); and we need to VOTE OUT ALL THE HAPLESS DEMOCRATIC LEGISLATORS who insist upon punishing big business with obstructionary legislation (Cap/Trade)

Oct 09 04:46 PM

[bigbaboon57:]

We ALREADY have a hugely up year.

We aren't going back to the highs of 2008, the fundamentals are much worse now. Yet we aren't that far from those highs ALREADY.

The risk now is to the downside. My guess is that a crash will happen very suddenly, blamed on some black swan event (maybe bomb Iran, maybe dollar crash, ...)

Oct 09 06:50 PM

[j-dub:]

Fundamentals be damned, we're due!!!!

Oct 09 08:16 PM