Long-Term Investing

Stock Markets, The Curse of the Year Ending in 7 – True or Myth?

I’ve heard many times thoughout the year that the market is bound to go down in 2007, “because it always goes down in the years ending in 7″. Nobody knows why or how, but it just happens, deal with it. Just for the fun of it and in part to calm my own fears, I thought I’d check if it’s true. Here’s a chart of Dow Jones Industrial Average (DJIA) annual closing values, courtesy of StockCharts.com. The red lines are my doing – they highlight each year ending in 7.

Click to enlarge

If any conclusions can be drawn it would be that 1) the market (as represented by DJIA at least) does not go down every year ending in 7; 2) true, it did go down in the years ending in 8 a few times; so it’s possible this is what we’re building toward this time as well.

Wouldn’t it be easier to just have the market correct, shake it off and have it over with? Most recoveries have been pretty swift, none taking more than 5 years to get to pre-crash levels.

Chart source: http://stockcharts.com/charts/historical/Print/djia1900print.html