“Stocks are now, we believe, in the midst of a one-time-only rise to much higher ground — to the neighborhood of 36,000 for the Dow Jones Industrial Average. After they complete this historic ascent, owning them will still be profitable but the returns will decline. You won’t be able to make as much money from them each year. We believe that in the meantime, however, astounding profits will be made.”
“Many small investors are already catching on. They have ignored the dire warnings from professionals that have accompanied nearly every step of the Dow’s rise from 777 on August 12, 1982. They are rejecting the outdated model that Wall Street has used to assess whether stocks are overvalued — a model based largely on historical price-to-earnings, or P/E, ratios. That rejection reflects not their nuttiness but their sanity. Contrary to the famous warning from Alan Greenspan, the chairman of the Federal Reserve Board — made on December 5, 1996, with the Dow at 6,437 — many investors are rationally exuberant. They have bid up the prices of stocks because stocks are a great deal.”—The Atlantic, September 1999
Yes, including stocks in your portfolio makes sense. However, 10 years after the original prediction, the highest the Dow has gone is 14,000+. Remember: there are good times to buy and good times to sell. You need to make those decisions based on your plan and not on the theories promoted by people who believe they’ve found a way to predict what the market will do next.
