The Dow Jones Industrials (DJINDICES:^DJI) have posted extremely strong performance in 2013, surprising many investors who had expected the average to pull back after four years of gains following the financial crisis. But taken in a historical context, just how does the Dow in 2013 and its jump this year of more than 22% rank among the best years for the market? Let's take a look back to see where we stand.
More points than you can shake a stick at
If you judge the Dow in 2013 in terms of points, then this is shaping up to be the best year ever for the Dow Jones Industrials. Based on Friday's close, the Dow is up more than 2,900 points so far this year, giving it a wide margin over the next-best annual point gain of 2,315 points back in 1999. Like 2013, 1999's gains punctuated a long string of sizable jumps in previous years, with the Dow having risen by more than 1,000 points each year from 1995 to 1999. By contrast, the five-year period from 2009 to 2013 has involved more modest point gains, with the initial bounce from the 2009 lows slowing to a more measured pace in 2011 and 2012 before exploding higher again this year.
Yet to fairly represent past returns, looking at points isn't the best metric. With the Dow at 16,000, this year's 2,900-point gain produces a smaller percentage return than 1989's 27% jump -- even though the Dow rose by less than 600 points that year.
A solid gain in percentage terms
When you look at previous total returns for the Dow in percentage terms, the Dow in 2013 looks less exceptional. Over the past 100 years, the Dow has risen by 23% or more in 15 of them. The most recent came in 1997, when the Dow jumped almost 30% after successfully surviving the Asian financial crisis and a one-day, 554-point "mini-crash" that led many to conclude incorrectly that the bull run of the 1990s had ended.
In general, strings of solid performance have come in fairly close succession. Gains of 20%-plus came three times from 1983 to 1987, three times between 1954 and 1959, and three times each in the five years immediately before the Crash of 1929 and in the four years following the worst of the market's declines after the crash.
Maybe not the best year
In that light, even if the Dow's gains hold up throughout the rest of December, 2013 might not go down as the best year for the average ever. Nevertheless, investors should celebrate the strong returns while they last, because the returns of the size that we saw in the Dow in 2013 don't come along all that often.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool has 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.