Goodbye to the Naughts!

Year 2009 marks the end of the decade, and I say Good Riddance!  The Naughts, as some people call it, turned out to be the absolutely worst decade in stock market history, with S&P 500 losing 3.3% on average every year.   Compare that to the 30’s: during that decade, the market rose 1.8% annually!  Clearly, as bad as the Great Recession has been, it still can’t even begin to compare in economic terms to the Great Depression.  The main reason for the poor market performance during the last 10 years is that stock prices rose very fast in the 80’s and 90’s.  By the way, those 20 years followed poor 70’s; 30’s were also followed by a decades-long stretch of market gains.  By this historical perspective, next major move should be up (despite that good 2009).

My sentiment about last quarter of 2009 remains very similar to that of a couple previous quarters.  The economy continues to exhibit more and more signs of clear recovery, in GDP growth, improving housing market, stabilizing unemployment, strong corporate earnings, low interest rates, and even consumer sentiment.   The sentiment of market advisors, however, remains decidedly guarded since the gains occurred much quicker than anybody could have anticipated.  Many believe that this is still a bear market rally.  Indeed, can the market really go higher having already risen so much and so fast since March?  The short answer is — yes, it can.  It was unimaginable to think that it could drop even further from the levels of one year ago — and yet it did.

I am sure you realize that I am not actually making a prediction here; I never do.  The future is unknown and my guess is as good as yours.  There is a very good possibility, however, that the market will continue its climb of the wall of worry.