Prague Twin

Wednesday, January 17, 2007

Credit Where it is Due

Anyone who reads this blog regularly knows that I am a bit of a bear on the U.S. Economy. Well, I've been proven wrong again and again of late. Having said that, I openly admit that I tend to underestimate the resiliance of the U.S. economy.

As of yesterday's close, the Dow is up about 1800 points in the last six months (about 15%). January 17th was the low point of the last major correction, so it is now officially a 6 month rally without a single major correction. If you look at this six month chart you see a very smooth, steady rally. Low volatility, and no major corrections along the way.

15% in 6 months is fantastic, but it is not unprecedented. If you go further back, you will see that it is roughly the same for the one year performance (about 15%). And if you go back to the beginning of the Bush administration you will see that this six-month rally represents more growth in the value of equities that has been seen over the entire time Bush was in office. Not that it was his fault, but just to note that over the last six years, the Dow is averaging growth of only 2%.

I suppose that means this rally could still have a long way to go. Now that I've said that, I'll probably be proven wrong.

3 Comments:

  • Directly tied to $51 per barrel oil. Makes energy independence all the more important.

    By Blogger Frederick, at 1:23 AM  

  • With winter finally here on the east coast and winter hammering the midwest, oil prices should start to climb again. And then when the Iran attack comes and the Persian Gulf gets a little choppy for a while...

    By Blogger reality-based educator, at 8:44 PM  

  • The drop in oil has been a huge sigh of relief for the markets. Should that turn around, and interest rates stay where they are (which I figure they will) we could see quite a correction.

    By Blogger Praguetwin, at 10:57 PM  

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