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The Continuing Trend

with 2 comments

Recently, there has been a lot of talk regarding the “lost decade” with the markets we live in. Barry Ritholtz, writing a The Big Picture, posted the graph below while discussing this idea in the context of debate on CNBC and the Wall Street Journal.

100 Year DJIA Chart

This graph would indicate that we aren’t out of this slump yet–and may not be for a while as far as the markets are concerned. Also, we must remember that this is a market graph, and not necessarily the growth of the economy in the sense of a GDP figure. The economy exhibits the similar short-term ups and downs, but follows a slightly different route in which GDP growth averages about 2% per year in the United States and has for well over 120 years. The DJIA exhibits greater growth with the appearance of more volatility (the average is measured frequently, while GDP is normally in months). The markets and GDP are economic indicators, but tell a much different story.

 The observation of this graph is interesting in the market context, which shows that a bull run of nearly twenty years may have given way to a bear market. Also, from the looks of this graph, a bear market lasts much longer than a recession (15-20 years compared to 2-4 quarters).

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Written by walonline

March 27, 2008 at 12:56 pm

2 Responses

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  1. Great graph, it’s really interesting to see it laid out like that in terms of the market. Makes the slowdown easier to look at, and look forward through.

    Paul Prins

    March 27, 2008 at 4:35 pm

  2. […] thing we do know is that we are in a bear market. I posted on this at the end of March, noting a graph of the DJIA since 1900 and the tendency for bear […]

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