January 14, 2009
The DJIA dropped almost three percent today, as it closed in the red for the sixth session in a row. While the NASDAQ and the S&P500 declined even more – -3.67 percent and 3.35 percent- the DJIAs string of losses is the more important consideration.
This is the 11th time since 2000, that the DJIA has followed this path. Moreover, these all occurred when the market was falling, in 2000, 2001,2002,2005,2007, and 2008. Furthermore, three of these days were in January.
Many observers believe that the action in this first month of the year serves as a reliable predictor of what the rest of the year will bring. In considering the 16 years, since 1950, when equity prices fell between January and December, this rule of thumb proved to be accurate in each year except two: 1994 and 2001.
In viewing the prospects for this year, and not even considering the current state of the banking system, these statistics provide a sobering perspective. Additionally, including the possibility of a decline in real Gross Domestic Product makes the outlook for equity prices in 2009 not very promising.
DJIA -2.94 percent
NASDAQ -3.67 percent
S&P500 -3.35 percent