The stock market returned more than 52% in the last 12 months - a rare event in almost 72 years of data - and, based on history, index-fund investors have a better chance for a well above-average gain in the next 12 months than for any loss.
But there is no obvious pattern or correlation.
The huge return has many advisers for pension funds and other institutional investors offering differing views about what may happen in the ensuing 12 months and what asset allocation adjustments to make.
So far in August, through midday Aug. 15, the Standard & Poor's 500 stock index has declined sharply - 4.3% including major falls of number Aug. 8 and Aug. 11.
The August drop contrasts sharply with the spectacular 12 months ended July 31.
The S&P 500 for that one-year period produced a total return, including dividends reinvested, of 52.14%, according to Ibbotson Associates Inc., Chicago, which compiled statistics at the request of Pensions & Investments.
"What happened in the last 12 months is a rare and extraordinary experience," said William P. Miller, chief investment officer/large-capitalization growth equities at American Express Asset Management Group, Minneapolis.
This latest 12-month return is only the 22nd time the S&P 500 index has gone up 50% or more in any 12-month period since Jan. 1, 1926, or in 859 12-month observations over the almost 72-year span of the Ibbotson review.
What happened in the 12 months following such an upsurge produced no overwhelming discernible trend in 847 observations of the ensuing 12 months, although clearly the data show the chances are better for a positive return than a negative return for the next 12 months starting Aug. 1.
In 12 of the 21 ensuing 12-month periods, the return was positive, almost all in the most recent such periods. The upswings averaged 16.6%, including seven ensuing periods that were more than 16%.
In only nine of the 21 ensuing 12-month periods was the return negative, and seven of those downturns occurred before 1935.
The declines averaged 9.9%, while the worst was 26.11%, for the 12-month period from Sept. 1, 1929, through Aug. 31, 1930, which includes the infamous market crash of October 1929 that marked the start of the Great Depression.
"The news is it isn't that bad if the worst return of the data is a negative 26%," said Derek Sasveld, senior consultant at Ibbotson.
"A lot of investors could lose 25% of a portfolio and still do very well if they have been invested for a while."
"But we wouldn't be surprised if the (positive) run kept going," he added.
Mr. Sasveld recommends pension funds do nothing drastic, mainly a regular rebalancing to target mixes. With the explosive 12-month return, he said, "It's not a pure enough story (or historical trend) for people to say, 'Sell my stocks now.'"
At BARRA Inc., Berkeley, Calif., Ronald Kahn, director-research, cautioned on extrapolating trends from the sensational 12-month returns.
"There are overlapping periods," he noted. Indeed 14 of 22 big 50%-plus 12-month gains occurred from 1929 through 1939.
Mr. Sasveld noted the statistics show a bias in the Great Depression period, with so many of the high returns coming in the 1930s.
"I think you can make a case the Great Depression period was a little more volatile than the present," he said. "Intraday and day-to-day volatility is increasing, but annual volatility is unchanged," he added.
Some might argue for tossing out the years of the Great Depression in compiling a statistical analysis, he said.
"But the October 1987 crash is unforecastable without the Great Depression and crash of 1929 data," he said.
Because of the overlap, Steven C. Leuthold, principal at Leuthold Group, Minneapolis, considers the seven 50%-plus return periods, stretching from April 1933 through February 1934, as one big period.
"This is really one rebound period," he said.
Mr. Leuthold also considers the overlapping periods of 1936 and then again in 1943 and 1983 one period each.
The upshot of considering those overlaps as single periods is that the 50% move is rarer than it appears.
BARRA's Mr. Kahn cautioned about skewing the results for a letdown. "You position in on the big events, so you can't possibly repeat them" in subsequent periods, Mr. Kahn said.
Also, the data show "market timing is very difficult," Mr. Kahn said.
He pointed out the lack of a pattern in subsequent 12-month periods following the 50%-plus returns, although the following months were more positive than negative.
At Roxbury Capital Management, Santa Monica, Calif., Anthony H. Browne, chief investment officer, said, "I still think there is a multiyear period of expansion remaining in the stock market."
The rise, he said, will be fueled by tremendous earnings growth in major industries, such as automobiles, banking and technology; also "by the end of the Cold War and Cold War deficits." The latter is causing a new decline in inflation.
In addition, Mr. Browne said the market is fueled by the "baby boom retirement-savings boom in this country and around the world. That's just beginning."
Also, companies are better managed and more competitive globally.
Better management has been spurred by "LBO people putting the fear of God in management" and by management adopting the Warren Buffett axiom of managing to increase shareholder value, Mr. Browne said.
The powerful U.S. global position now is a payoff in part of the corporate global marketing efforts in the 1970s and 1980s, he added.
"We're in a long-term buying opportunity for stocks," Mr. Browne added. "I think we have four or five years more of a bull market."
American Express Asset Management's Mr. Miller is optimistic, seeing perhaps a 10% return in the market for the next 12 months.
"I still see stocks giving a better return potential than you'll earn in cash or bonds," Mr. Miller added. Critical factors for the market will be inflation and interest rates.
"The market is reflecting the fact that the uncertainty of things we worry about has diminished and our ability to manage them has increased," according to Mr. Miller.
He is optimistic on inflation and interest rates staying low.
But Mr. Miller noted, "There is a belief that because the market is up so much, it must be excessive, and that we are (in the) late (stage) of the economic expansion. Under that belief, he continued, the expanding economy will put a strain on resources, inflation will rise causing interest rates to increase.
But he added, "Very few people have a recession forecast."