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Strategies & Market Trends : The New Economy and its Winners

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To: Lizzie Tudor who wrote (47857)	1/24/2009 6:00:11 PM
From: Rock_nj	Read Replies (2) of 57684

Wouldn't that 80% to 90% haircut be measured from the peak of the Dow and Nasdaq in the fall of 2007? We are already down 40% to 50% from the peaks of both averages a couple of years ago, so my interpretation is that he's saying we could drop another 40% or so from these levels, which is not unthinkable. Recently, the Nasdaq fell 75%+ from the peak in 2000 to the bottom in 2002. The Dow fell 90% during the Great Depression of the 1930s. It is true that stocks have traded well above their long term (like century long) P/E averages in recent decades. If the S&P 500 had remained on its past course from the early 20th century, it would be around 700 to 750 right now. I think the difference that some analysts don't account for is that now a lot more people have their money in the stock market than they did in the early 20th century. It changes in the 1980s and continues today, which puts upward pressure on stocks. Therefore, is it unreasonable to expect higher P/E levels today and therefore higher averages than the long term trend would indicate?

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