The WSJ’s Jason Zweig points out that last week, the Dow Jones Industrial Average rose above 10,000-again. Since March 16, 1999, when it first touched 10,000 in intraday trading, the Dow has bounced over that threshold and back 63 times. Friday, the index closed 219.6 points below where it stood exactly 11 years ago.
(Click to Enlarge)
Source: www.stockcharts.com
This isn’t the first time stocks have been stuck on a seemingly endless pogo-stick ride. On Jan. 18, 1966, the Dow hit an intraday high of 1,000.50. It broke through the four-digit barrier three more times that January and Febrary, then faded. The Dow cracked 1,000 again in 1972 and 1976, then fell back both times. Not until December 1982 did the Dow finally hurdle above 1,000 and stay there.
History is under no obligation to repeat itself exactly, but this comparison does beg the question of how long before the Dow Jones Industrial Average will meaningfully rise from the 10,000 level. The fluctuations around Dow 1,000 persisted for 17 years. We have been fluctuating around Dow 10,000 for 11 years. Periods of extended Dow stagnation can test the patience of even the most forbearing equity-only investor.
One way to deal with this U.S. equity stagnation is to employ an investment strategy that has the flexibility to shift into many different asset classes in order to find those asset classes that are currently in secular bull markets. This is exactly the objective of our Global Macro strategy which tactically overweights those asset classes with the best relative strength. Consider the table below which shows the average allocation to each of the major asset classes since mid 1999:
Every major asset class goes through periods of extended stagnation - it is just part of the cyclical nature of the financial markets. Rather than making permanent commitments to any one asset class, we find it more prudent to employ a flexible global asset allocation strategy that keeps our options open.
Global Macro is available as a separately managed account. To receive a brochure, please click here. Global Macro is also available as the Arrow DWA Tactical Fund (DWTFX).
Click here to visit www.arrowfunds.com for a prospectus & disclosures. Click here for disclosures from Dorsey Wright Money Management. Past performance is no guarantee of future results.
