Friday, January 11, 2008

DJIA Above 15,000 By Year End?

Interesting chart above (click to enlarge) showing the performance of the U.S. stock market in election years (green line) vs. non-election years (blue line) from 1900-present, showing about a 10% average annual stock market return in non-election years, vs. about a 14% annual return in election years. In that case, we can expect the DJIA to reach 15,000 by the end of 2008, and an S&P500 close to 1700 by year end, assuming this is a typical year for the stock market during an election year.

(HT: Fancy Plaid Pants)

5 Comments:

At 1/11/2008 2:48 PM, Blogger Ironman said...

At this point, absent a disruptive event, we can reasonably expect the S&P 500 to be up for the year, ending between 1540 and 1690 (1610 would be the target.)

The driving factor will be the rate of dividend growth. Should the dividend growth rate decline (say if Citibank and other banking and financial companies cut their dividends during the course of the year as is currently rumored), the amount of growth in stock prices will be less, shifting toward the lower end of that range.

The good news is that other companies are doing well and growing their dividends, so ending the year up is very likely.

Need more information behind why these figures? Here's why dividend growth rates are so important, and here's how you can use them, along with the growth rate of stock prices, to measure the amount of distress in the stock market (the more distress, the more likely a recession.)

 
At 1/11/2008 3:41 PM, Anonymous KJ said...

You failed to show the chart about what happens when an the Republicans are in power and lose - market does much worse than is shown.

 
At 1/11/2008 6:26 PM, Anonymous Anonymous said...

A most interesting chart because it seems to suggest far more volatility in an election yr.

Recently, the market has taken a sh*t kicking. Am crossing my fingers that the market stops over-reacting to every bit of bad news. It is certainly hard on the portfolio.

Must also hope that the democrats aren't as economically challenged as they sound.

 
At 1/12/2008 9:42 AM, Blogger Ironman said...

anonymous:

It's actually yes and no with regard to market volatility in an election year. I don't think the calendar of elections affects volatility in the market, rather the presence of distress in the markets affects election outcomes. That'll be something we'll explore in upcoming weeks.

 
At 9/09/2008 7:27 PM, Anonymous Anonymous said...

As an Mises devotee I think 5000 is more likely than 15000 if we inflation adjust. The sandwich generation is getting killed by the Fed/Congress/MICC. Asians will eventally stop bailing us out, sooner rather than later. It took over a decade for the 60's stagflation and the election of a conservative president (self named, I called him a friendly fascist) that signalled a sea change. Obama is a socialist that will make things worse, McCain is a fascist with a full load of pile and a mean heart that may do as stupid of things as Bush II. Another Black Swan and the house of cards falls.

 

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