Call it curiosity or joblessness, today I decided to spend few hours looking at the Dow Jones Index data for the last decade. I have no stake in any US stock, but my objective here is to understand the magnitude of impact of any event on the stock market. Though doing this exercise on the Sensex would have made more sense to me, I figured that finding data and information on something that is US based is probably faster than its Indian counterpart. 🙂
Thanks to MSN, I got the Dow Jones Industrial average data for the period Oct 1998 to Oct 2008 within seconds. I marked all the major high and low points in the graph (in blue). And a mouse over feature on MSN helped me find out the dates and correspoding closing values of the index. That data, in turn was used to create the left side of the table below the graph.
The right side of the table shows information collected on the events that coincide with the corresponding high-low points. These events have been gathered from google searches which resulted in articles and news reports relevant to the months/indices in question.
The first row of the table shows an important event that is not marked in the chart. 1997 saw turbulence in the Asian market that affected the world markets. The major event was the fall of LTCM hedge fund and default by Russia which led to a major financial crisis. Prior to that the US economy, since 1992 was on a Clinton Bull Run. The Dow was at around 4000 when Clinton took office and went on to hit 12000 by 1999.
Bush took office in 2000 and for the next 3 years a series of major events of all kinds – social, economic and financial, resulted in a very erratic market behavior. During that period, Federal interest rates were cut multiple times resulting in very cheap credit. Slowly, the housing mortgage market began growing. Internet and technology companies continued seeing good boosts and grew at phenomenal rates.
The Bush Bull Run from mid 2003 to 2007 was initially marked by the capture of Saddam Hussein. The same period saw tax cuts and rise of internet giants like Microsoft and Amazon. General confidence in US market started growing and companies across industries did well. The Industrial average index saw new Tech companies being a part of it. The year 2005-2006 saw setbacks that had impact on oil (in the form of hurricanes Katrina and Rita) and uncertainty (due to change in Fed Chairman). However those were minor and the general trend was bullish.
The subprime mortgage credit crunch that we talked about in previous posts, characterizes the major dip since end of 2007. As you can see, the fall till date is a very steep one. And every other day marks a new record of historic importance. The past year has seen a tumble of about 7000 points which is more than the points gained in the Bush Bull Run.
While there is no particular conclusion I can or like to draw from this post, I am wondering if I can do something with this and my earlier post about technical analysis and make some predictions. Well then, I guess the agenda for the next post is set and if it doesnt work, I’ll go on and do the Sensex version of this one! 🙂