The Three-Year Bull Market Significance and the Profits Available for the Investor!
Sectors that have done well – and those that haven’t!
March 12, 2012
Last Friday marked the three-year anniversary of the Dow's March 2009 bottom. Since then, the big-cap index has pretty much doubled.
To understand the significance of a three-year bull market and profit from it is to take a look at some similar three-year rallies to see whether or not there is an expectation that this one will continue. Also, an overview of which sectors have done well -- or not so well -- over the last few years, will also help trader decisions!
• DJIA 12,907: up 97.2 percent from 3/9/09 close of 6,547
• S&P 500 1,365: up 101.9 percent from 3/9/09 close of 676
• NASDAQ 2,970: up 134.1 percent from 3/9/09 close of 1,268
• Wilshire 5000 total return (includes dividends): up 122.5 percent from 3/9/09
If you include dividends, the performance looks even better, with the Standard & Poor's 500 Index (SPX) up 115 percent and only 3.76 percent below the bull market high of October 9, 2007 - without dividends, the S&P has another 13 percent to go.
Going back to the 1920’s there has been only five other times when the Dow Jones Industrial Average (DJIA) has doubled in a three-year span. Only one instance is considered in a three-year stretch, so there are no overlapping signals. The table below shows each occurrence. The last time this happened was from 1994-1997, after which the market did very well for the next two years. Soon after those two years came the popping of the tech bubble -- but, nonetheless, there was still plenty of money to be made after May 1997. The table summarizing these five returns shows that, despite the extended rally, the market is not necessarily overbought, as the post-signal returns look pretty bullish.
Below are some tables showing where investor’s money would have worked, or not worked, over the past three-years bull market rally. This is achieved by looking at a host of exchange-traded funds (ETFs) to gauge sector performance. The first table shows some of the better-performing sectors over the last three years. With all the talk about the dying consumer, and all of the awful housing figures over the last three years, it's interesting that the retail (XRT) and builder (XHB) ETFs show up in this table.
The next table shows which sectors have performed the worst over the past three-year bull market rally. Clean energy (KWT, PBW) and the dollar (UUP) lost money during the span in which equities doubled. Bonds (TLT) and agriculture (DBA) both gained, but did not nearly keep pace with other assets.
Finally, while many equities have seen huge gains over this bull market run, below are the worst of the worst, as far as individual stocks go. Among liquid stocks trading above $6, these have all lost at least 20% of their value in the last three years. If they performed this badly during a three-year bull market, is there any hope at all going forward? “Only time will tell!”