Wednesday, December 31, 2008

Worst Year Since 1931

Few investors will mourn the passing of 2008. For good reason.

The Dow Jones Industrial Average fell 33.8%, it's worst drubbing since 1931 and its third-worst year ever. The Dow's loss has been exceeded only by a 53% loss in 1931 and a 38% loss in 1907. It was slightly worse than its loss in 1930.

The Standard & Poor's 500 Index fell 38.6%, its worst performance since 1937 and third-worst loss.

The Nasdaq Composite Index, established in 1971, lost 40.5%, its worst year ever -- even worse than after the dot-com bust.

Next year may not be anything like 2008 and could even see a rebound. But there are enough minefields facing both the economy and investors that deep caution will be the watchword.

The housing industry still hasn't bottomed, and the year-old recession is likely to be the worst since the 1970s. Meanwhile the fates of General Motors (GM, news, msgs), Ford Motor (F, news, msgs) and Chrysler are problematic.

Yet a new administration takes over in three weeks, with promises of a big stimulus package to jump-start the economy. An administration's first year is often good for stocks.

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