Office Hours: Where oh where is the stock market heading?
In the first week of October, 1987, I happened to be on a radio talk show when the host asked me where the stock market was heading. I told him that I couldn’t be certain, of course, but I expected that in two weeks it would lose about 20 percent of its value.
Sure enough, on October 19, the Dow Jones Industrial Average fell 508 points — 22.6 percent. It was the largest one-day percentage drop in the history of the Dow — almost 10 percentage points worse than anything 1929 or Covid could deliver.
As you might expect, I was deluged with phone calls and letters, most asking to sign up for my investment letter. Alas, I didn’t have an investment letter. (And I still don’t — this is not an investment letter.) But for the next year or so I was considered something of a stock market guru.
What I didn’t tell anyone is that my prediction — that in two weeks the stock market would lose 20 percent of its value — was not new. I had been making exactly the same prediction for at least four years. Which all goes to prove that if you stick to your guns, you too can become a stock market guru with your own investment letter.
On a more serious note, many people have expressed concern to me lately that the stock market is overvalued. Obviously, the stock market is not the real economy. But because people put their savings there, turbulence in the stock market can affect the real economy.