History of the long run

1NEW YORK (AP) -- Investors are suffering through one of the most stressful periods they may ever face, watching their stocks fall but holding fragilely to the belief that in the long run they'll rise again.

Well, that at least is what they're being told by many of those folks who are called experts and who, when they're riding high, develop a cultish following.

Opinions often cost nothing; following them can cost a lot. And since the specific factors involved in the marketplace today have never been faced before, it's safe to say that expert opinion is truly rare.

Historical perspective, so long as it is based on facts rather than interpretations, is another matter. And those facts do indeed show that after initial shocks, stocks can regain a surprising robustness.

Gerald Perritt, mathematician turned analyst and editor of "Gerald Perritt's Mutual Fund Letter," is among those who, while recognizing that past and future are unique, still believes history offers guidance.

And so he researched the past and this is what he found:

On July 8, 1932 the Dow Jones industrial average was at 41.22 points. During the next 68 years, a period marked by depression, world war, nuclear threat and hyperinflation, it rose to 11,700 points.

But nearly seven decades can be a lifetime, stretching the meaning of long-term beyond that imagined by most investors. Everyone and their goals exist in a time frame, and "long-term" can mean one year or 10 years.

Recognizing this, Perritt broke his calculations into five-year segments and matched them with what at the times were viewed as dangerous, depressing, fateful events, similar to those of today.

World War II was one of them, of course. Five years after the country declared war the Standard & Poor's 500-stock index had risen 127.5 percent. It rose 73.4 percent after President Kennedy's assassination, and 117.4 percent after President Nixon's resignation.

Many millions of investors remember the crash of October 1987; five years later the S&P average had risen 96.8 percent. And five years after the onset of the Gulf War is was higher by 130.6 percent.