The Dow: 3 Years After the Crash

Three years ago, on March 9, 2009, the Dow Jones Industrial Average (INDEX: ^DJI) and the S&P 500 (INDEX: ^IXIC) both had a terrible, horrible, no-good, very bad day. Not only did both indexes dip during that dismal trading session, but both also recorded an all-time low for the new millennium.

Three years later, however, the story has evolved quite nicely. Just last week the Dow crossed the 13,000 mark, and this week, which marked the anniversary of that low point, investors took note as the indexes recorded nearly 100% gains during that three-year timespan.

In isolation, the Dow's 13,000 mark and the anniversary could seem a bit arbitrary, particularly irrelevant to a buy-and-hold investor's long-term strategy. At The Motley Fool, for example, we tend to obsess over individual stocks, learning everything we can about the fundamentals of a particular business. Foolish investors are largely indifferent to the market's day-to-day movements.

Still, these landmark occasions can be a good time to reflect on the past, to consider our investment approach, and to check our ability to leave emotions at the door even during tumultuous market periods.

Fellow Fool Morgan Housel wrote an excellent article on the merits of the buy-and-hold strategy for investing even in the face of a non-stop news cycle that constantly toys with an investor's emotions. In his article he noted that the past three years were quite possibly some of the best the market has ever witnessed. Ironic, perhaps, since multiple pundits on CNBC proclaimed that the market was far from a bottom and that President Obama was "conducting a War on Business" in the early days of March 2009.

If, in fact, Obama was conducting a so-called "War on Business," I'd say he's losing terribly. The Dow, which tracks the performance of some of the largest American companies, surged more than 95% over the past three years. Meanwhile, some of the best blue chips in the Dow doubled that return during the same time frame.

American Express was the runaway success story over the past few years, returning an average of 74.4% annually, which amounted to a total return of around 400%.

In addition, what a difference three years made for large industrial companies such as Caterpillar and General Electric. In Caterpillar's case, the housing market's collapse weighed heavily on demand for the company's earth-moving heavy equipment. On the flipside, General Electric suffered immensely because of its close ties to the risky financial markets through its GE Capital unit.

Both Caterpillar and GE seem to be back on track, poised for even further gains from growing demand. Caterpillar's CEO remarked recently that the company has posted the best volume increase in the United States since Harry Truman was president more than 50 years ago.

GE's CEO, Jeff Immelt, was perhaps less bullish about the American economy, but he was especially optimistic about GE's status as one of "America's top exporters," noting that the granddaddy of conglomerates will succeed because of its exposure to rapidly growing emerging markets. "Our company, because of our great people, can win," he said. "And that is the American spirit."

The question is, what's in store for the next three years? Will the American economy continue to ramp up with another impressive growth period? Or should investors heed Immelt's advice and look for a faster-growing economy like China or Brazil? If, in fact, you believe South America could be the next runaway growth story, The Motley Fool has identified an outstanding way to invest in this region. It's an American company, with a focus on the hot Latin American market. Our chief investment officer explains why this company will succeed in a recent special report titled "The Motley Fool's Top Stock for 2012." The report's available for only a limited time, so download it now!