S&P 500 Finishes the Year Down 1%+

The S&P 500 finished the day down 1.03%.  In the index's history going back to 1928, it has only ended the year down more than 1% four other times.  Below is a list of the prior occurrences along with the index's return over the next day, week and month.  As shown, the first time this happened was actually back in 1996, so the index went 68 years without having a 1%+ down day to end the year.  The last time it happened was in 2009, and following that down day, the index gained 1.6% on the first trading day of 2010.

With so many investors lagging the market this year, it's only fitting that we ended it on such a down note.  Even though the major indices traded up on the year, most traders are now heading home saying "good riddance" to 2014.  

Dow Doggin‘ It Into Year End

It looked like investors may get to cheer on the market into the new year this morning when the major indices were trading in the green, but we've seen big batches of selling since mid-day that has taken us solidly into the red.  The Dow is now set to end the year on a three-day losing streak.  

Since 1900, the Dow has ended the year on a three-day losing streak just six times before this year.  The last time it happened was ten years ago in 2004, and prior to that it hadn't happened since 1986.  

Below is a look at the year in which the Dow ended the year with three down days in a row.  For each instance, we also include how the Dow did on the first trading day of the next year, the first three trading days of the next year, and over the entire next year.

As shown, back in 2005 (following 2004's three-day losing streak to end the year), the Dow traded down to start the new year, and it ended the year in the red as well.  Overall, though, the Dow has gained on the first trading day of the new year in four of six instances, and it has been up 4 of 6 times over the first three trading days as well.  Let's see how 2015 plays out!

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Noted for Your Afternoon Procrastination for December 31, 2014

Screenshot 10 3 14 6 17 PMOver at Equitable Growth--The Equitablog


Must- and Shall-Reads:

And Over Here:

  1. William Barnett, ed.:: Rational expectations: A Panel Discussion: "Kevin Hoover: 'Kevin Hoover: Bob, did you want to comment on that? You’re looking unhappy, I thought.' Robert Lucas: 'No. I mean, you can’t read Muth’s paper as some recipe for cranking out true theories about everything under the sun.... My paper on expectations and the neutrality of money was an attempt to get a positive theory about what observations we call a Phillips curve. Basically it didn’t work.... I thought my model was going to explain price stickiness, and it didn’t. So we’re still working on it.... I don’t think we have a satisfactory solution... but I don’t think that’s a cloud over Muth’s work. If Jack [Muth] thinks it is, I don’t agree with him. Mike [Lovell] cites some data that Jack [Muth] couldn’t make sense out of using rational expectations.... There’re a lot of bad models out there. I authored my share, and I don’t see how that affects a lot of things we’ve been talking about earlier on about the value of Muth’s contribution.... You know, people had no trouble having financial meltdowns in their economies before all this stuff we’ve been talking about came on board. We didn’t help, though; there’s no question about that. We may have focused attention on the wrong things; I don’t know...'"

  2. Duncan Black: Does Anybody Remember MOOCs?: "They were all anybody who wrote about education would talk about for awhile. Where did that all go? Apparently administrators finally figured out that a 'course in a box' actually costs a lot of money, that it doesn't scale nearly as well as they hoped, that they are a substitute for 'learning from a book' not 'learning from a person,' and you can't charge $50,000 per year tuition simply because your prestigious name will be on the online course degree. I knew all of this because I saw people experimenting with online courses... 15 years ago. The technology, except maybe easy use of video (you could use video, it was just a bit more of a pain), was all there then..."

  3. Paul Krugman: Keynesians and the Volcker Disinflation: "Right-wing economists like Stephen Moore and John Cochrane--it’s becoming ever harder to tell the difference--have some curious beliefs.... One... is that the experience of disinflation in the 1980s was a huge shock to Keynesians, refuting everything they believed. What makes this belief curious is that it’s the exact opposite of the truth. Keynesians came into the Volcker disinflation... with a standard... model.... And events matched.... Cutting inflation would require a temporary surge in unemployment. Eventually, however, unemployment could come back down to more or less its original level; this temporary surge in unemployment would deliver a permanent reduction in the inflation rate, because it would change expectations.... [That's] what the Volcker disinflation actually looked like.... It was the other side of the macro divide that was left scrambling for answers. The models Chicago was promoting in the 1970s, based on the work of Robert Lucas and company, said that unemployment should have come down quickly.... Those models were unsustainable in the face of the data. But... most of those guys went into real business cycle theory--basically, denying that the Fed had anything to do with recessions. And from there they just kept digging ever deeper into the rabbit hole...

  4. Laura Tyson and Lenny Mendonca: Obamacare and Effective Government: "When historians look back on the United States’ Patient Protection and Affordable Care Act... they will not devote much attention to its regulations, its troubled insurance exchanges, or its website’s flawed launch... [but] on how ‘Obamacare’ encouraged a wave of innovation that gradually tamed the spiraling costs of a dysfunctional system, even as millions of previously excluded Americans gained access to health insurance..."