$10,000

280.90

"Stocks tend to fluctuate", so said J.P.Morgan in one of history's great understatements. One look at the History of the Stock Market in the 20th Century (which follows) confirms this.   The stock market goes up (a Bull Market) and down (a Bear Market), but beyond that, Wall Street, quite unbelievably, has no universally accepted definition of either, so here goes:

BULL Market: Charles Dow (of Dow-Jones’ The Wall Street Journal and The Dow Theory fame) defined it as "a broad upward movement" - I’d say O.K. but a little vague. Ned Davis Research defines it as "a 30% gain after 50 days…or a 13% rise after 155 days" - now I’d say that’s not too vague, but is a little too much.   My own studies of the stock market in the 20th century show many fluctuations of 10 or 15% that don’t develop into anything, but when markets bounce up 19% that is the threshold from which advances have then risen 95% of the time to over +29%. One-half have risen over 80%, with the average Bull market gain being  123%, and lasting nearly 3 years (based on the record with the aberrations of the 1930’s removed). Therefore, I define a Bull market as one which advances 19% on both the Dow Jones Industrial Average and the Standard & Poor’s 500 over any timeframe.  Economic expansion has followed each such occasion. Subscribers will find a full report plus graph in the Special Report: Bull Markets of the 20th-21st Century.

BEAR Markets follow (and precede) Bull markets. The market has declined over 10% more than 50 times in the 20th century, yet that alone has not resulted in Bear markets. The threshold of -16% has resulted nearly 82% of the time in declines occurring of at least -21%. Nearly one-half (10 of 22) have dropped over 35% with the average loss for Bear markets being -34% over a year and a half's time. Therefore, I define a Bear market as one which declines 16% on both the Dow Jones and the S.& P. 500 over any time-frame. This definition is followed 77% of the time by recessions. It happens that a 16% decline is the reciprocal of a 19% advance, and vice versa. A market decline from 10000 to 8400 (-16%) would be a Bear market, and conversely a market advance from 8400 to 10000 (+19%) would be defined as a Bull market.   Subscribers will find a full report plus graph in the Special Report: Bear Markets of the 20th-21st Century.

How does it matter?  Usually Bull markets occur for 67% of the time and Bear markets exist for some 33% of the time. When Bear markets come (and they always do) they have been followed 77% of the time by recessions. (see "The Stock Market as a Business Cycle Predictor in the 20th Century" which follows). Some Bear markets take years to regain their losses, for instance it took 25 years after 1929 to get back to those highs.  After the market first hit 995 on the Dow Jones Average in 1966, it was still at that level 16 years later in 1982. And then came the 17 1/2 years from 1982 to the year 2000 with a 15 fold increase that had newer investors thinking it wass always like that. The market ALWAYS does one of three things: it can go UP, DOWN, or SIDEWAYS. But it NEVER goes just one-way forever!

Buy & Hold results from 1953-1997 were calculated by Hulbert Financial Digest using the Dow Jones Industrial Average with dividends reinvested yearly, and kept up to date since then using that same methodology.

ÞThe BOTTOM LINE: Despite Wall Street being a two-way street, still, most investors should simply Buy and Hold stocks for the long-term.  The results to the left show how $10,000 would have grown to $3,100,657 by buying and holding over the last 54 years.  This is the benchmark against which the results of timing the market should be compared.  You will see our interpretation of The Dow Theory and the Schannep Timing Indicator both beat this benchmark!   

The following are additional pages of this section:

Historical Record  |  The Bull and Bear Bell Curves
Bull Markets & Expansions  |  Bear Markets & Recessions 

$15,018

404.39

$18,940

488.40

$20,260

499.47

$18,550

435.69

$25,701

583.65

$30,829

679.36

$28,914

615.89

$35,394

731.14

$32,696

652.10

$39,427

762.95

$46,787

874.13

$53,410

969.26

$45,052

785.69

$53,631

905.11

$57,777

943.75

$51,074

800.36

$55,547

838.92

$60,986

890.20

$72,090

$62,632

850.86

$48,138

616.24

$69,513

852.41

$85,304

$74,466

831.17

$76,469

805.01

$84,516

838.74

$102,662

963.99

$99,140

875.00

$124,741

1046.54

$156,682

1258.64

$158,463

1211.57

$210,367

1546.67

$267,045

1895.95

$283,058

1938.83

$328,283

2168.57

$432,265

2753.20

$429,955

2633.66

$532,760

3168.83

$572,094

3301.11

$667,773

3754.09

$700,924

3834.44

$956,536

5117.12

6448.27

7908.25

9181.43

10,453.92