Newspaper article THE JOURNAL RECORD

Where Does It Go from Here?

Newspaper article THE JOURNAL RECORD

Where Does It Go from Here?

Article excerpt

SAN FRANCISCO -- I made a bold prediction in a Sept. 10, 1995, San Francisco Examiner article that the Dow Jones industrial average could reach 7,000 by the end of 1998!

Well, hindsight is easy, and of course the market's beaten that level by 1,000 points and roughly a year and a half.

Where do we go from here? Well, of course, nobody knows. The funny thing is, not a lot has changed on Wall Street since 1995. Cautious optimism continues to drive the bull market. For the last five years or so, money managers, portfolio managers and most brokers have been cautious about the market's level. Many have questioned the rich valuations given to the bigger capitalized stocks, primarily those in the Dow Jones industrial average and the Standard and Poor's index. Investment professionals have been aware of the risks involved in this record-high market, and have not been shy about expressing it. But average investors -- whether through 401(k) plans, stock bonuses or just investing on their own -- have been relatively quiet about risk. They've continued pouring money into the stock market. And so, for over the last 15 years, except for a blip or two, the individual investor's been right. The question remains: How much longer? The usual answers -- valuations according to price-earnings ratios, book-price ratios, sales-price ratios, etc. -- reflect very high and risky valuations, certainly in those big-cap stocks. The smaller-cap and micro-cap stocks reflect much more reasonable valuations. But this latter area is starting to heat up also. That rise is usually a precursor of some sort of market top. Top or not, the stock market is subject to supply and demand, greed and fear. With the absence of more attractive investment alternatives, the flood of money coming from the fruits of a strong economic climate, and new market highs making investors feel rosy, the fundamentals for a robust market continue in place. But that could change overnight. …

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