The Dow Jones Industrial Average during the first decade of the 20th and 21st centuries is included above. The
first decade of the 20th century is shown as a green graph with index prices on the left axis and dates shown at
the bottom in green. The first decade of the 21st century is shown as a red graph with index prices on the right
axis and dates shown at the bottom in red. The four and one-half years prior to each decade are also included to
show market appreciation as investors approached the dawn of a new century.
Both decades formed huge rounded tops, (A-B-C1) and (A-B-C2), with both tops centered near the turn of the
century (B). Both ascended to the turn of the century (A-B) with very similar rates of appreciation. Both decades
followed the same general pattern until point C1.
The first bear market of the present decade ended one year earlier than the first bear market of the 20th century
(C1 vs. C2). The present decade's first bear market was less severe but, with the slower recovery to point D, has
achieved a ten year performance very similar to, but slightly below that of the previous century. The major
bottoms of 1902 and 2003 occurred in October. The panic of 1907 bottomed on November 15th.
It is hard to resist the temptation to speculate about the cause of the significant similarities between the two time
periods. Many have felt anticipation of a prosperous future as the dawning of a new century drew near. We have
seen in our century that those expectations were frustrated by a severe bear market. Our technology, wealth,
industrial and military dominance dwarfs that of the previous century. However, as decision makers, we have bid
up and down the prices of stocks in basically the same pattern.
Man is still man. He is subject to similar strengths and weaknesses, motivations and delusions. Possibly we
avoid the mistakes of our fathers and thereby commit the errors of our grandfathers. We should learn from both.
How can I use this information?
Several consecutive years of a rising stock market may encourage many to forget that tumultuous times will
return. They always do. The reputation of bear markets to end near Halloween is enhanced by the above graphs.
Investors must always look forward. Accordingly, be wary of the period leading up to October of 2007. Investors
were probably feeling peaceful, prosperous and optimistic at point D in 1906. By November of 1907, the Dow
was down 49% from its all time highs.
Don't expect recent gains to continue forever. Be emotionally prepared to shift to bearish positions. As previous
Investment Tips issues suggest, abundant reasons for a downturn exist. SignalTrend's unemotional computer
timing system is currently bullish, but it may change its buy / sell signal in the near future. If that happens,
SignalTrend will notify you by email. Remember, SignalTrend's stock market timing system was backtested 100
years with excellent results!
The above research on this issue of Investment Tips was initiated by a request from one of SignalTrend's
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All of the above data is for the Dow Jones Industrial Average (DJIA) excluding dividends.
|Is the First Decade of the 20th Century Repeating Itself?
Proprietary Graphs, Tables and Analyses - All Rights Reserved
|DJIA: 1996-Present Superimposed on 1896-1910