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Where the stock indices will
go?
An example , how to analyze financial data
(August 2001)
This is a very important question for long term investors. Let us look
at three examples the DOW, the Swiss SMI and the German DAX. An exponential
fitting of the chart curves gives an average interest for the DOW from 1970
to 2001 of 9% and for the German DAX of 8.6 %. The growth rate was constant
until summer 1995 (see the graph below). From 1995 to 1999 we see a sharp
increase of most indices, which stopped in summer 1999. Nearly all indices
except the NIKKEI share this behaviour!
If we assume, that the average growth rate of 8 to 9 % will be a long term
growth as long as inflation doesn't gain momentum, we must expect for the
next couple of years a zero growth of the stock indices at least for the
next 3 years. Some indices like NASDAQ (see graph) fell so rapidly, that they
are already on track.
Dow Jones 08/20/2001
DOW & DAX 03/04/2002
DOW & DAX 09/24/2002
How did we create the exponential fitting?
XYFIT ( MS Excel addon) polynomial fitting allows to calculate
the range of a curve. We calculated the curve data from June 1970 to
June 1995. The fitting curve was extented to June 2008. Then we made
the assumption, that the extreme gain starting in 1995 will fall back to the
average gain before 1995. ( August 2001)
The last development 01/14/04 of the Dax shows, that the index is at a normal
value.
The last
development 02/01/05 of the Dax shows, that the index
is at a normal value.
The last
development 07/14/05 of the Dax shows, that the index is
in a normal
range. The red curve
is an exponential fit of the data, before the big bubble started in 1995. The
black curve excludes the data between
1995 and 2003.
The last
development 06/08/07 of the Dow Jones index shows, that the index is
in a normal
range with an average interest rate of
8.7 %. .
The last
development 06/08/07 of the Dax index shows, that the index is
in a normal
range with an average interest rate of
8.5 %.
The last
development 06/08/07 of the Swiss index SWX shows, that the index is
in a normal
range with an average interest rate of
8.9 %. .
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