So the DOW reached 13120.94 at the close of this week, which puts it 11.92% higher than its 11722.98 peak in January 2000. By contrast, consumer prices have increased by about 22.75% over the past 7.25 years. In other words, in January 2000 dollars, the DOW reached 10689.26 or 8.8% below its record real level. But that didn’t stop Business Week from saying:
The Dow Jones industrial average finished the week at another record high … The stock market has considerable buying power despite numerous skeptics, says S&P.
Kash reminds us of a Business Week article back in June 25, 1990:
Remember the adage “Fool me once, shame on you; fool me twice, shame on me”? That explains why, even with the Dow Jones industrial average above 2900, stock market investors are far more jaded than jubilant. In the summers of 1987 and ’89, the market took big strides and scored new highs – only to get clobbered in the fall. So those already in stocks are wondering if it’s time to get out, and many on the sidelines are afraid to come in, for fear they’ll be fooled yet again. But the timid might be the ones who get fooled this time around. The Dow is on a roll. After setting a new record of 2935 on June 4, the market made a quick retreat to 2862, only to come bounding up again.
This jubilation was just before the start of the 1990 recession. I hope we don’t have a repeat of that episode, which is why I’m hoping the Federal Reserve lowers interest rates.