With Wall Street about to begin the first full trading week of 2015, investors around the country have to be wondering if the equities markets are poised for further growth — or if the 20.7 average annual return over the last three years has exhausted the bull run.
Well, if you are thinking about pulling some cash out of stocks — or have missed the run-up over the last 36 months — here are some facts to chew on along with your morning bagel.
We are entering into the third year of a presidential term and when it comes to such years the S&P 500 Index has posted increases in 18 straight terms.
That’s right, the last time in a president’s third year that the S&P hasn’t gone up was 1939, and then it only went down 0.41 percent. In other similar years, the S&P has increased an average of 22 percent.
What’s more, the Dow Jones industrial average hasn’t declined once in the third year of a president’s term.
Here’s another interesting pattern: In the nine years that have ended in “5” since the S&P 500 debuted in 1923, the Index has never gone down.
Not once.
In fact, in only two of those nine “5” years — in 2005, when it rose 4.9 percent and in 1965, when it was up 12.5 percent — did the S&P rise less than 25 percent. (The Dow has averaged gains of 28.3 percent in “5” years since Dow Jones & Co. co-founder Charles Dow first established his index 130 years ago.)
I know, I know — the past is no guarantee of future performance. And yes, I know there are plenty of land mines ahead to blow up this long-running record.
One danger spot is the Federal Reserve and when it will decide to raise interest rates. It is no coincidence that since Dec. 16, 2008, when the Fed cut rates to zero, the S&P has average annual gains of 17.6 percent.
Fed Chair Janet Yellen has pledged patience when it comes to raising rates, but a continued economic recovery could force her hand sooner than anticipated. And that could kill the bull run.
Another danger spot is oil. Sure, the AAA has predicted that US motorists could save $75 billion at the pump in 2015 if oil prices remain at or below the $55-a-barrel level they are at now, but those savings will likely be either redirected to retail spending, personal savings or paying down debt.
Saving money and paying down debt do not create jobs. Redirecting savings into retail-store spending may create jobs — but they likely will be lower-paying than the gas- and oil-drilling jobs that high-cost oil created.
Some of the best new jobs in recent years have been in the fracking and oil-sand drilling/exploration sectors.
Already, drilling projects are being put off because they are not profitable with oil at $55 — and layoffs could follow.
I’m not rooting for higher oil prices — just pointing out potential dangers ahead for stocks.
But I’ve always been a believer in history, and that math is the most meritorious arbiter — and all those years of positive returns are hard to ignore.