2/10/11 Hulbert: Say What?

http://tinyurl.com/6ccjxcb

Hulbert's analysis speaks for itself:

If indeed the broad market averages were soon to join the mid-cap and small-cap indices in new-high territory, it would mean that the overall stock market in two years’ time had overcome the 2007-2009 bear market.

Though that might strike you as an extraordinarily fast recovery, it actually is quite in line with historical norms. Consider, for example, the recovery time from the mother of all bear markets — the one from the 1929 stock market high to the 1932 low, in which the Dow lost some 90%. According to Wharton finance professor Jeremy Siegel, the inflation-adjusted total return index of the U.S. stock market was in late 1936 and early 1937 just as high as it was at its pre-crash peak in 1929.

That recovery, in other words, was achieved in “just” four and one-half years from the market’s mid-1932 low.

Historians often exaggerate how long the market has taken to recover from past bear markets because they focus on narrow market averages and ignore factors like dividends. The Dow, for example, didn’t battle back to its 1929 high until 1954, 25 years later — suggesting to the unsuspecting that it took more than two decades for the stock market to recover from the 1929 Crash and subsequent bear market. That’s just wrong.