During recessions many investors wonder whether or not investing in the stock market is a solid investment. They have reason to feel this way. The market peaked on October 9, 2007 at 14,164 and bottomed out at 6,547 on March 9, 2009.
Some investors haven’t forgotten. When polled they believe the market has continued to perform poorly. Actually, the market has come back nicely.
At the end of 2012 it had returned to 12,938 – about 19% of its 2007 peak value. A look at the annual performance of the Dow Jones Industrial Average follows:
• 2007 6.4%
• 2008 -33.8%
• 2009 18.8%
• 2010 11.0%
• 2011 5.5%
• 2012 5.8%.
Improvement in the equity markets is an important part of the recovery. With four years of gains, consumers more confident about their perceived wealth and are more likely to purchase goods and services. As long as consumers are staying within their means, the spending spurs growth in the economy.
©Copyright 2011 by CBER.