San Francisco Examiner
Wednesday marked the 10-year anniversary of the bull market, which, according to many market specialists, began on Oct. 11, 1990, when stock prices ended a serious decline and began their dramatic surge.
The Dow closed at 2,365.10 on Oct. 11, 1990, with the Nasdaq finishing at 325.61. On Wednesday the Dow, a key market indicator containing 30 bellwether stocks, closed at 10,413.79. The Nasdaq ended the day at 3,168.49.
Despite periods of turbulence, it has been a remarkable 10 years.
Wall Street’s advance has created a new group of investors to whom volatility, as much as double-digit growth, seems perfectly normal. That’s in stark contrast to the staid, single-digit growth during much of the Dow’s 104-year history.
With roughly half of all U.S. households now holding equities either in self-directed retirement plans or online brokerage accounts, investing in the stock market has spread beyond the well-heeled investors of yore who could call their broker with orders to buy or sell.
Public attention has been focused on finance in an unprecedented way, documented by the proliferation of news channels and Internet sites, to say nothing of hourlong prime-time dramas, dedicated to the markets.
"It became a kind of pastime, it became very exciting," said James Cramer, a hedge fund manager and founder of TheStreet.com, a financial news Web site.
"It will become less exciting as it (the market) goes down," Cramer predicted. "A lot of what happened is the natural realization that you can make more money in the stock market than you can get in a paycheck, and certainly more than when you gamble."
A prime example: Cisco Systems, a maker of computer hardware, traded at 8 cents a share (adjusted for stock splits) at its lowest point on Oct. 10, 1990. Cisco’s stock closed Wednesday at $51.19.
The market capitalization of publicly traded U.S. companies, roughly $5 trillion in 1990, now stands at $15 trillion. The Standard & Poor 500 index has also tripled.
The technology sector has driven the run-up in stocks over the past decade but has been struggling in 2000.
Prices for technology and Internet companies have plummeted, even for those reporting profits such as Yahoo which beat analysts forecasts but saw its stock drop to $65.38 on Wednesday.
And interest rates — which the Federal Reserve cut during much of the early- and mid-1990s to spur investment and corporate growth — have been lifted over the last two years to put the brakes on inflation.
Each year since 1990 the Dow industrials have either risen or managed to avoid a 20 percent decline, which would have signaled the end of the bull market and the beginning of a bear market.
To be sure, it has not been a smooth ride all the way. The Dow dropped about 2,000 points over the course of a few months in 1998, before reverting to its upward trend. The Asian financial crisis of 1997 caused many bullish investors to pull their money from the markets, and there was heavy selling in April, particularly in the tech sector, when investors began to question some companies’ profitability.
Still, this market has thrived on bulls, and bulls, being what they are, are not ready to give up, even if expectations should be reduced or the focus — perhaps away from technology, and into more traditional U.S. business — should change.
"I would say that people who got in during that period have an unrealistic expectation of what the market can do, but a correct expectation of the love affair with growth," Cramer said.
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