Updated 9-1-15
Secular Market Top - Since January 2000
+43.8% Dow
+163.5% Transports
+98.3% Utilities
+34.2% S&P 500
+17.4% Nasdaq
+54.8% 30yr Treasury Bond
+291.1% Gold
From High to Low
+291.1% Gold
+163.5% Transports
+127.4% Oil
+98.3% Utilities
+54.8% 30 Year Treasury
+43.8% Dow
+34.2% S&P 500
+34.2% S&P 500
+17.4% Nasdaq
It is easily seen that in the year 2000 the Nasdaq was horribly overvalued and gold was on the give away table, such lopsided returns 15 years later!
Also of interest the stodgy 30 year Treasury bond has outperformed the Dow, S&P 500, and the Nasdaq since the year 2000. The modern portfolio crowd back in the year 2000 would find this a very low probability outcome. Value player's, due to extreme valuations, would have recognized this as the most likely outcome (close to a no-brainer!).
It is easily seen that in the year 2000 the Nasdaq was horribly overvalued and gold was on the give away table, such lopsided returns 15 years later!
Also of interest the stodgy 30 year Treasury bond has outperformed the Dow, S&P 500, and the Nasdaq since the year 2000. The modern portfolio crowd back in the year 2000 would find this a very low probability outcome. Value player's, due to extreme valuations, would have recognized this as the most likely outcome (close to a no-brainer!).
Since August 2000 secular top with its minuscule dividend yield of 1.11% subsequent market highs have a fatter dividend yield; market bottoms as well. This is simply the unwinding process of the year 2000's Great Insanity secular top.
Please note: DYI disagrees with dshort.com marking March 2009 as a secular bottom as valuations were at average historically. Secular bottoms have all been recorded (world wide markets) at fire sale prices with very fat dividends and many times the Shiller PE10 in single digits.
TOP
August 31, 2000
1.11% dividend yield
BOTTOM
February 31, 2003
1.93% dividend yield
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TOP
May 31, 2007
1.72% dividend yield
BOTTOM
March 31, 2009
3.60% dividend yield
**********************
TOP?
July 31, 2014
1.91% dividend yield
BOTTOM??
If history and this pattern holds the bottom will have a yield in the 4% and possibly the low 5% range. For a secular bottom to form requires a complete washout of the public desire to own stocks whether individual shares or through mutual funds.
The chart ends at the year 2013. The AAII has stated in their latest survey individual investors have approximately 67% in stocks either through individual shares or mutual funds. When the participation is cut in halve and stays down a secular bottom will be formed. Don't be surprised if the dividend yield is 6% and possibly 7% range.
The stock and bond markets have a long way to go before they bottom out. Today of course stocks and bonds have been priced to the moon providing future returns to be dismal at best and worst losses. DYI's sentiment indicator spells out where we are for our four asset categories.
Market Sentiment
DYI's formula based asset allocation remains the same extremely defensive.
Updated Monthly
AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 9/1/15
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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