Friday, October 09, 2009

Market Performance After Big Down Years

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)

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