Surprise! The Dow Hasn't Soared As Much As You Think

Stock market gains all depend on your perspective.

Jun 14, 2014 at 11:02AM

The Dow Jones Industrials (DJINDICES:^DJI) have put in an impressive bull-market run over the past five years, with such huge gains that many investors have gotten nervous about how much further the Dow's upward move could really go. But as with so many things, your conclusions depend on your perspective. Even though from one standpoint, the Dow's jump has been monumental, another equally valid way of looking at the Dow's performance leads to a much different conclusion.

3 pictures of the same market
Time and time again, you've heard about the extent of the Dow Jones Industrials' gains over the past several years. From lows below 6,600, the Dow is now challenging the 17,000 mark, which puts the Dow's gain at around 155%. That's an annualized gain of just shy of 20% over the 63 months since the Dow's March 2009 low, or roughly double the long-term returns of the stock market.

Dow Chart

Dow data by YCharts

From this chart, scared investors look down from today's big heights and conclude that a major bear market must be coming. Indeed, many investors have been nervous for years, even before the market reached its current levels.

But if you're convinced that the Dow Jones Industrials are near a market top, then the right way to assess their performance isn't from a market bottom. Instead, you should use a previous market top. Fortunately, we have such a top handy, from back in October 2007. And when you look at the market's returns since then, you get a much different picture:

^DJI Chart

Dow data by YCharts

Here, total returns of just 18% equate to annualized gains of just 2.5% or so. That return omits the dividends that the stocks in the Dow Jones Industrials pay out, but it still pales in comparison to the long-term returns of the stock market generally.

If you go back to the previous highs before 2007, you get an even longer-term view that again comes out to about a 2.5% annualized return over a 14-year period:

^DJI Chart

Dow data by YCharts

None of this proves that the Dow isn't poised for a decline, or that the drop won't come as soon as Monday's opening bell. But in order to get a broader historical perspective of the Dow's returns, you can't just look at a single bull market out of context. Instead, the smarter move is to look at the bigger picture, and in this case, doing so makes the case for further stock market gains look more compelling.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers