Woodley Farra Manion Portfolio Management


	Market History Indicates Long Term Growth May Be at Hand

	September 16, 2009 The current stock market rally has been met with much pessimism. Some analysts suggest the rally is simply a bounce from extreme oversold conditions and that future returns for the coming years will be sub-par at best. These low expectations are positive since bull markets are well known to climb a "wall of worry." The chart above shows the rolling ten year average rates of return for the preceding ten years going back 128 years. Each point on the line represents the prior ten years' average rate of return. For example, the best ten year period (1949 to 1959) had average annual returns of 21.6%. The ten year period from 1998 to 2008 saw average annual returns of 0.61%, the lowest in the entire period analyzed. As markets have cycled up and down, please note the change in direction once the average ten year return has reached 20% or more and when it dropped below 5%. Each milestone was eventually followed by a change in fortunes that marked the end of a good or bad period of economic performance. Pessimists predicting poor returns for the next several years may want to remember the caveat "past performance is not a guarantee of future results." The global economy is indeed going through a very difficult time, but the last 128 years have included depressions, world wars, political upheavals and more. Chaos seems to be more the rule than the exception. And yet, markets and economies recover and high quality stocks survive and thrive, providing excellent long term returns for investors who respect history and recognize opportunities. As the chart may indicate, we may now be at a pivotal point where the next ten years will provide much stronger returns in the stock market.