Tuesday, April 12, 2005
The highest close for the S&P 500 was 1527.46 on March 24, 2000. Today the S&P 500 is around 1187.76. For the index to have a 10-year return of 12.3%, it needs to increase 44% to 1715.33 in the next 5 years. This rise would represent an annualized gain of 7.7%.
The lowest year end close Dow Jones Index has ever experienced was around 60 in 1932, in the midst of the Great Depression. The increase from 60 points to today's 10507.97 is a total gain of 17413.28%, or an annualized gain of 7.4% for 72.25 years.
In summary, the stock market will have to outperform at least one major index's long term average in the next five years to prevent 2000-2010 from being the market's worst decade.
Simply from a statistical perspective, I would expect the market pendulum to swing back to the black significantly over the next half decade, beating long term averages and annulling this post.