Read it here first: the 100-year Dow Chart

Barron’s Up & Down Wall Street column runs one of our favorite long term looks at the markets over the past 100 years, below.

We’ve run this chart so many times we are on the verge of becoming repetitive, showing it here, here, and here, and of course, at the Cult of the Bear series (part II) at the

click for larger graphic



Perhaps now that Barrons Up & Down Wall Street has run it, the concept may be perceived as less  ridiculous than it has up until now.

Here’s Mike Santoli’s take:

"Something about the larger environment might be at work, too. As the chart nearby shows, we are about six years beyond the peak of the last bull market, long enough for investors to feel they’ve paid their dues and are owed some easy profits.

Yet reminders of the fragility of the gains mustered haven’t been handled smoothly. Not to spoil anyone’s fun, but the three earlier periods that followed huge secular bull markets lasted from 16 to 25 years, in which bull and bear markets came and went but little progress was made. Yes, it could be different this time. Make that bet only after looking at the chart.

There are societal parallels to Wall Street’s mood, a more general sense of unease: The aggregate economic numbers are presented as strong, yet public surveys show plenty of economic insecurity. Unemployment figures are low, yet there is vociferous political support for harsh immigration measures. Cheap imports sustain America’s consumption habit, but protectionist sentiment’s growing.

Opportunists rightly view this sort of diffuse anxiety as a reason to turn more positive. On a near-term basis, leaning into the gathering public discomfort could well prove correct, and be rewarded with a nifty little bounce in the market and/or a sequence of more encouraging economic figures. This would reinforce the glass-half-full perspective.

For such a play to be more than a trade, however, it will have to become evident that all this anxiety is misplaced, not that there’s an emerging sense of foreboding auguring a less-generous environment."

My only caveat is that the post-1929 environment, the next Bull market can be dated starting from around 1942. So while it did take 25 years to get back to breakeven from pre-1929 crash levels, its inaccurate to describe the post 1929 period as 25 years of flat trading — its more like 17, as investors saw a strong upward bias from 1942 forwards.

That Rydex chart is a bit flawed, and its why I created my own improved version for the  Technical studies in the Cult of the Bear.

100 Year Chart , DJIA
click for larger graphic

The post Bull/Crash refractory period (as I like to call it) has been shown by a variety of studies — I recall one by Ned Davis — typically last about 2/3rds as long as the prior Bull market lasted. That suggests this period should end sometime around 2012.


The Wrong Guy
Barron’s June 12, 2006

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What's been said:

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  1. DBLWYO commented on Jun 10

    Of course seen and admired this chart before. Sometime ago I took a look at major shifts in technology over the four waves of the modern economy. There are several folks who’ve done something similar and one can argue about the steel and steam age of the late 19th century, the electical & chemical + gas engine phase and then the post WW2 electronics/pharmaceuticals/transportation bursts of invention and innovation. Notice that the “Next Big Things”, which cause major shifts in the productive possibilities of the economy, roughly correpsond to the surges in the markets. There would appear from your charts to be other things at work as well but….

  2. Blissex commented on Jun 10

    It would be nice to see your “100 Year Chart , DJIA” deflated by some ”inflation” indicator (either consumer price index or wholesale price index or earnings index or commodities index or real estate index), or at least in a logarithmic scale.

    Indeed it might be even better to see it overlaid with all those indices, to give a sense of perspective as to available macro trend investment choices…

  3. Barry Ritholtz commented on Jun 10


    Put it together for me, and I’m happy to run it!

  4. jim commented on Jun 10

    I wonder how legions of traders around the world trading the US market will effect long term trends, if at all. I was watching Adobe trade one day this week and it was a constant flow of mostly 100 share trades, on a $28 stock.

  5. Zephyr commented on Jun 10

    The chart is very interesting. However, I think there is less here than meets the eye. The patterns are less significant than they appear. The recovery from 1942 to 1965 was 23 years following 13 years of decline, which followed only 8 years of boom. The “flat” market during the 1970s was in reality a significant decline on an inflation adjusted basis. The longer surges and slow periods are of random length, all punctuated with very significant short-term variation.

  6. Zephyr commented on Jun 10

    I do think it is useful information, but not as conclusive as it appears at first blush.

  7. Mark commented on Jun 10

    Ignore what it is saying at your peril.

  8. chris commented on Jun 10

    but i saw on kudlow last week four analyst who all said ” bull , bull, bull, buy, buy , buy

  9. Zephyr commented on Jun 10

    Mark, I agree that it would be perilous to ignor it… But it would also be perilous to bank on it.

  10. jkw commented on Jun 10

    DBLWYO, that is an interesting point. Cause and effect would be hard to determine though. Was technology advancing rapidly because of investment or were investments doing well because of technology advances? During the dot-com bubble, a lot of research was funded because people were throwing money at anything. Most of the good ideas probably would have been funded anyway, but there were probably a few things that only got discovered because someone was willing to throw money at a crazy idea that surprised everyone by working.

    Where does the 2/3 number come from? The periods I see in your chart are 17/8 and 18/20. The ratios are 2.13 and 0.90, nowhere near 0.67. How far back do you have to go to get 2/3? Or is that based on smaller cycles?

  11. Franco commented on Jun 10

    As cliche as it sounds it all depends on when you buy and when you sell.

  12. bt commented on Jun 10

    I love these charts. I have seen this and many others over the past few years. The fact that these charts are again making headlines in major publications is a good sign that the public’s memory of risk is being awaken. Just as people ignored all the macro problems for many years (which serious macro analyst didn’t know about the credit bubble, the real estate inflation, commodity inflation, derivatives bubble etc in the last three years?) and only started to wake up to those when they started making headlines, people have ignored the “reversion to the mean” pattern of asset prices. For comparison, in late ’99 I started seeing a chart comparing Nasdaq to Nikkei (in two different places; one was in RealMoney published by Helene before teh Nazz bubble burst). You would think such a comparison and its implications would be widely distributed and acknowledged. No, it took the major publications several months after the bubble burst to notice this comparison and then, about 18 months after it first started appearing, the Nikkei/Nazz comparion chart started appearing in publications such as Barrons. That is a sign that the crowd was willing to acknowledge reality and hungry for explanations after the barn door was already wide open. So it appears that reality is now starting to hit the crowd and that means we are probably going to see it priced in — rather quickly if history is any guide.

  13. bt commented on Jun 10

    Franco, you hit the nail on the head. IMHO, even in a secular bear market, nimble and careful traders can make as much money on the long side as bears can make on the short side. In a secular bull market, however, even the smartest short sellers will have a hard time turning in returns as good as the stock market averages. No wonder the number of bulls is much higher than the number of bears.

  14. DavidB commented on Jun 10

    One thing I notice about those charts is that all the sideways action just happened to coincide with America’s last(and current) four major wars. The only one that doesn’t seem represented is Korea but that was relatively short and inexpenseive. I also notice that it took a few years for the US to recover from Vietnam but it could be argued that Vietnam left the US much more psychologically and financially damaged than the previous wars did.

    With that understanding, I wonder about the correlations first off in the market and how general economic unease may create and lead to the wars. I also wonder if America won’t be able to put it’s sideways action behind it until the current bloodshed in the middle east ends?

    Wars are expensive not only in the price of people, but also in the diversion of government tax dollars, resources and mental focus and the waste of corporate resources to supply military goods that will just be blown up anyway. Given that this current war is happening when America can least afford it economically and the fact that it is causing more people than ever to lose faith in the role of their government, it could very well take a decade to recover from the sideways movement given that the correlation between the post war and the resumption of bull market is correct

  15. Steven commented on Jun 11

    I’ll buy in when the valuations get juicy.

    This 1 yr trailing P/E of 17 is only an earnings pop from the liquidity boom that can’t be sustained.
    Remember the 10yr trailing P/E from Barry’s old chart is still at 26 when it’s historically around 16 (shooting past up or down)

    I think rising bonds will force the next downleg.
    Long investment grade is creeping past 6%

  16. rick commented on Jun 11

    weren’t the pe’s in the 4 -7 range during the
    74 recession??

  17. Zephyr commented on Jun 11

    CPI deflated dow… It looks like there were no flat periods on an inflation-adjusted basis. Only bull and bear markets.

  18. cbk commented on Jun 11

    of course any historic look back at an indice’s performance is a little disengenuous as the components of the indice never remain the same. the DJIA is constantly rotating the losers and sold outs out, replacing one company with another. it would be interesting to really see what a period looked like with the components not removed over the period.

  19. jkw commented on Jun 12

    Indices with constant components will have the same price plot as any company: It will start low, go up, plateau for a while and then drop down to 0 when all the companies have gone out of business. Although companies are normally bought out before they go bankrupt because every company has something of value. So to construct such an index, you would have to keep track of conversions to stocks of different companies. At any rate, a constant-component index doesn’t seem like it would be interesting or informative.

  20. TonytheTiger commented on Jun 12

    While you guys are waiting for the “Big Crash”…there’s money to be made. It’s time to buy!…or close to it.

  21. David Allen commented on May 1

    Why isn’t anyone showing a current chart of the DOW showing a new CLOSING HIGH at the end of 2007?

    I say it will continue up at least until May or June of 2010. This is using a log scale 100-year chart of the DOW. If it doesn’t top out there I look for Dec. of 2012.

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