The Dow Jones Industrial Average developed by Charles H. Dow in 1895 and the Railroad (now Transportation) Average added in 1897, were originally intended to be indicators of business activity. By adding the Bull and Bear definitions you can see that “the market” has been an excellent ‘Predictor’ of the economy in the 20th and 21st centuries as shown below:
| BULL MARKET DATES | BUSINESS EXPANSION DATES | LENGTH IN YEARS OF THE BUSINESS EXPANSION: | LEAD TIME OF BULL MARKET START TO EXPANSION START: |
|---|---|---|---|
| 9/1900 - 6/01 | 12/00 - 9/02 | 1.8 | 3 months |
| 11/03 - 1/06 | 8/04 - 5/07 | 2.8 | 9 |
| 11/07 - 11/09 | 6/08 - 1/10 | 1.4 | 7 |
| 9/11 - 9/12 | 1/12 - 1/13 | 1.0 | 4 |
| 7/14 - 11/16 | 12/14 - 8/18 | 3.7 | 5 |
| 12/17 - 11/19 | 3/19 - 1/20 | 0.8 | 15 |
| 8/21 - 3/23 | 7/21 - 5/23 | 1.8 | -1 |
| 10/23 - 9/29 | 7/24 -10/26 | 2.3 | 9 |
| (11/27 - 8/29) | 1.8 | n/a | |
| 7/32 - 3/37 | 3/33 - 5/37 | 4.2 | 8 |
| 3/38 - 11/38 | 6/38 - 2/45 | 6.7 | 3 |
| 4/42 - 5/46 | Same as above | n/a | |
| (10/45 -11/48) | 3.1 | n/a | |
| 6/49 - 4/56 | 10/49 - 7/53 | 3.75 | 4 |
| (5/54 - 8/57) | 3.25 | n/a | |
| 10/57 - 12/61 | 4/58 - 4/60 | 2.0 | 6 |
| 6/62 - 2/66 | 2/61 - 12/69 | 8.8 | -16 |
| 10/66 - 12/68 | Same as above | n/a | |
| 5/70 - 1/73 | 11/70 - 11/73 | 3.0 | 6 |
| 12/74 - 9/76 | 3/75 - 1/80 | 4.8 | 3 |
| 2/78 - 9/78 | Same as above | n/a | |
| 4/80 - 4/81 | 7/80 - 7/81 | 1.0 | 3 |
| 8/82 - 8/87 | 11/82 - 7/90 | 7.7 | 3 |
| 10/87 - 7/90 | Same as above | n/a | |
| 10/90 - 7/98 | 3/91 - 3/2001 | 10.0 | 5 |
| 8/98 - 1/2000 | Same as above | n/a | |
| 9/01 - 3/02 | 11/01 - 12/07 | 6.1 | 2 |
| 10/02 -10/07 | Same as above | n/a | |
| 11/08 - 1/09 | 7/09 - 2/2021 | 11.7 | 8 |
| 3/09 - 4/11 | Same as above | 4 | |
| 10/11 - 10/18 | Same as above | ||
| 12/18 - 2/20 | Same as above | n/a | |
| 3/20 - 12/21 | 4/20 -12/21 (*) | 1.75 | 1 |
| Average: | 4.0 years | 4..15 months |
*per Forbes Magazine 1/23/89, the economic expansion was interrupted by a “growth recession” when Industrial production fell from the 1st quarter to the 3rd quarter of 1967.
(*) GDP grew until Q4 2021. In Q1 & Q2 2022, GDP was negative. Although it was not officially labeled as a recession due to the strong labor market, the economic expansion ended in Q4 2021, which coincided with the top of the Bull market on 1/3/2022.
The BOTTOM LINE
100% of Bull Markets in the 20th-21st Century have been accompanied by or followed shortly thereafter (4.3 months on average) by economic expansions.