Joltin’ Joe DiMaggio, What Do You Know…How About the Dow Reaching 50,000?

December 23, 2017 | posted in: Blog, Financial Insights | by
Stock Performance from 1926 to Now
Many of you have sat in my conference room and viewed what we in the financial industry call the “Mountain Chart” of market performance.  The chart, courtesy of Morningstar, reveals that since its inception on 12/31/1925, the S&P Composite Index has averaged annual returns of over 10% per year.  I think my Dad, born in 1925, a year before the Mountain Chart begins, would agree with me that 91 years of performance history is a long and significant period for making observations.  Dad still talks about getting ice delivered to his apartment in the Bronx, about accompanying his dad during the Depression as he visited neighbors to collect life insurance policy premiums paid in weekly cash installments, (and getting robbed along the route more than a time or two!) and about how impressed he was watching Joe DiMaggio play center field at Yankee Stadium during his rookie season in 1936. The point is, 91 years is a long time.

Now let’s go back 35 years to 1982, some three years after Frye Financial opened its doors for business in South Florida.  What if you, for example, set aside one payment of $10,000 for one of your children and invested that amount in the market.  With only an 8% average annual return, more conservative than the 10% discussed above, that $10,000 investment would now, 35 years later, be worth over $150,000; 15 times the original amount!  I bring up this example to illustrate the powerful effect compounding returns can have over a long time period. I have seen clients quite taken aback by the effects of compounding returns on their accounts.

Can the market score a double?

If you believe, as I do, that history matters, and given that markets have always gone up in the long run, then you must acknowledge the possibility that the Dow can reach 50,000. For the Dow to grow from its current level of almost 25,000 to 50,000, it doesn’t need to grow to 15 times its value, as in my previous example; it just has to do a little more than one double. During “Joltin’ Joe” DiMaggio’s rookie season with the Yankees, he hit 44 doubles! 50,000 is not such a large number, and in fact, if the market performs at an average annual compounded rate of 8%, it would be realistic to imagine the Dow getting that double and hitting 50,000 over the next decade.

Exactly how long it will actually take to reach that milestone is impossible to predict. But I can tell you with great confidence, as a veteran in this industry, that if you hang in there and stay invested through the ups and the downs, then similar to Joltin’ Joe, it is possible you will experience your first double, and perhaps many more doubles over extended investment periods.*



*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Investing involves risk including loss of principal. 

Hypothetical example is provided and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.
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