A Sign of Bad Things to Come? Not Really

If the Dow 30 were to close at current levels, it would be the biggest one-day decline to start the year since 1983 when the index lost 1.86%.  Going back to 1945, today's declines are the second worst behind 1983 at -1.74%.  But do bad starts to the year indicate more declines over the next 364 days?  No.  Of the ten times that the Dow has closed down 1% or more on the first trading day of the year, the index has averaged a gain of 10.26% for the entire year, with up years 60% of the time.  These average gains are better than the average one-year change of 8.47% for all years since 1945.  It would still have been nicer if the index closed up more than 1%.  When that happens, the Dow has averaged a full-year gain of 12.81%.

Wondering how to invest in 2008?  Read our 90-page 2008 outlook, The Bespoke Report, by becoming a Bespoke Premium member today.