Riddle me this batman. This pitiful Dow rally would need to go on for another year and half and go up by another 100% just to match the Average stock market rallies after a bear market. With valuations already at 1929, 2000, and 2007 levels, bullishness at all-time highs, margin debt at all-time highs, corporate profits falling, the Fed close to raising rates, and the economy already in recession, do you think we’ll reach the average?
If so, take on some margin debt and buy some Twitter, Facebook, Apple, Amazon, Linkedin, and any other high flyer with a 100 PE ratio. Good luck with that. Have you heard the numnuts on CNBC tell you how weak this rally has been?
The Dow just made another all-time record high. To provide some further perspective to the current Dow rally, all major market rallies of the last 115 years are plotted on today’s chart. Each dot represents a major stock market rally as measured by the Dow with the majority of rallies referred to by a label which states the year in which the rally began. For today’s chart, a rally is being defined as an advance that follows a 30% decline (i.e. a major bear market). As today’s chart illustrates, the Dow has begun a major rally 13 times over the past 115 years which equates to an average of one rally every 8.8 years. It is also interesting to note that the duration and magnitude of each rally correlated fairly well with the linear regression line (gray upward sloping line). As it stands right now, the current Dow rally that began in March 2009 (blue dot labeled you are here) would be classified as below average in both duration and magnitude.
