For the long term 401k investor, anyone like me that started to rebuild from zero in 2000 after being layed off, the last 15 years has been no better than a savings account other than the company match. I got out and back in avoiding most of the 07- 08 bear, but I did not have much capital yet like most that got hit in 2000 from losses or loss of job, so my timing really did not help me much. Since 2000, the DOW is up 50%, over 15 years that comes to 3% annual average gain. The DOW went from 1,000 in 1982 to around 11,700 in 2000, 1200% gain and nearly 15% annual average return. I am starting to wonder if I will ever see another true secular bull market to DOW 100k within a 15-20 year timeframe in my lifetime. I mean, look at the Nikkei, topped at 40k in 1990 and is still less than 50% of what it was 25 years later with no end in sight. If the US losses superpower status or continues the fundamental direction, then we may be in a 40 year bear sideways mess that benefits no one except the order takers and mutual funds that scalp fees.
Now that we have 20 trading days in the books for 2015, I was able to develop an interesting model that suggests 2015 might be ugly for the "buy-the-dip" crowd. Since 1950, there have been 18 yrs where the SPX was down -0.2% or more in the first 10 trading days and down -1% or more in the first 20 days. This year fits that criteria, with the SPX losing -3.2% after 10 days and -3.1% after 20 days.
The list of years fitting the criteria are: 1953, 1956, 1957, 1960, 1962, 1969, 1970, 1974, 1977, 1978, 1981, 1982, 1990, 2000, 2002, 2005, 2008 and 2009. For those that know their bear market history, there are several noteworthy years in the list, i.e. 1974, 2000, 2002 and 2008.
The chart below shows the average performance in red of the SPX over those 18 years (ex 2009), along with the current 2015 performance in green for comparison. The gray lines are +1 and -1 standard deviation bands. I chose to leave 2009 out of the average due to extraordinary measures taken be the Fed that year. For reference, I show the average with 2009 included in blue.
On average, years like this lose about -9% with an upper and lower band of +4% and -22%. The average suggests we should see a low in mid to late February, followed by a weak rally into mid-late March. After March, it is all downhill until a low in late October. Following the Oct low, we should see a choppy rally into year end.