The decennial cycle is one of several cycles we look at when doing our investment homework. It’s an important cycle that dates back to the late 1800s when Charlie Dow first created the Dow Jones Industrial Average. This pattern considers the stock market performance in years ending with the same number. Currently, we are in the early stages of 2015, which is the fifth year of this decade. In our cycle study, we include this year with 2005, 1995, 1985, 1975 and so on. And upon reviewing the data, it’s clear that the 5th year of the decade has an amazing track record. The average return for the Dow Jones Industrial Average since 1895 for the 5th year of the decade has been 28.93%! Just as impressive (if not more so) is the consistent performance of 5th years. In fact, 11 out of the 12 5th years were up with the exception of 2005, which experienced a calamitous -0.61%. [thick sarcasm]
The first chart below shows the impressive consistency of each decade’s 5th year. The second chart below shows just how significant year 5 is compared to other years in the decennial cycle. No other year comes close to having the returns that year 5 has seen.
As impressive as this research is, we’re not going to trade solely on this information. But, we think it’s valuable to keep an eye on it as we head into this 5th year. The decennial cycle certainly suggests the current bull market will continue. Anything opposite will be historic.
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