Damned Decade & Thanksgiving Famine

The recent obsession with the market's failings over the past decade are understandable. For the first time since 1939 the Dow Jones Industrial average is down for the decade ending in the ninth year. The good news is it is not nearly as bad as the Great Depression and the decades following bad decades have bounced back solidly.


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Our good friend Sam Stovall at S&P informed us in a recent note that there is however a darker cloud over the current period. Including dividends, Stovall notes, the 2000s are the only decade in the past 90 years to post a decline. Stovall's 11/30/09 Sector Watch note states:

"No matter how well the S&P 500 performs this month, it will not be enough to erase the black mark on the annals of equity market returns. On a price-only basis, the S&P 500 fell nearly 26% from December 31, 1999 through November 27, 2009. And even when you include dividends, the 2000s have the inauspicios distinction of being the only decade in the past 90 years to post a decline; even in the 1930s the S&P 500 was able to eke out a cumulative advance of 10%."

Current economic underpinnings still leave something to be desired and the Obama adminstration's political capital has shrank like the market did in 2008, increasing the prospects of a more substantial market decline in 2010. Also disconcerting is some news we here from our friends in the high-end catering business: Wall Street and other corporate holiday parties have been reeled in the last minute.

With the "pros" pulling back, we have moved to higher alert. Also, Black Friday retail activity was unimpressive. Traffic was reported higher than last year , but sales were flat. It will be especially important to watch all the indicators over the next 2 months: seasonal, fundamental, technical, sentiment and the like, for clues to a break or a resumption of the bull market's momentum.

For all intents and purposes we have hit our initial target of Dow 10500, but we are having trouble breaking through. If we can, Dow 11000-12000 is doable before a substantial decline or bear market ensues. If not, a retreat back to the July lows around Dow 8000 could come sooner.