Dow Jones Industrial Average, S&P 500: Too Far Too Fast?

bearbull21Chris Turner: A question occurred to me regarding the rise of the S&P 500 since March of 2009 until today. Specifically, how many other times in history has the S&P 500 risen at this fast of a compounded annual growth rate? To make some comparisons over time, let’s build some charts.

In the first chart below, the blue shaded area shows the average of monthly closes for the S&P 500 while the green arrows denote periods of fast growth.

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To compare time periods more precisely, I calculated the Compounded Annual Growth Rate (CAGR) from March 2009 until December 2013 (4.75 years). The green arrows show several memorable time periods in recent history: the Rally of 1987, the Dot-Com Bubble, the Housing Bubble, and the current era of QE (another bubble?).

Let’s add in the CAGR using the exact time period of March 2009 to present as a basis and overlay that onto the chart. The green arrow on the right correlates to the current 19.85% compounded annual growth rate since March of 2009. In other words, for nearly 5 years, we have averaged a 20% growth rate year-over-year.

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The red line represents the CAGR for the previous 4.75 years to match our current situation. Worthy of notice would be that on a nominal scale, the numeric difference in 1987 time period was low, but on an annual growth rate, it exceeded our current environment.

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