The financial media often measure the performance of the stock market in terms of numerical milestones, and we just hit one of the most positive ones yesterday.
It wasn't quite two years ago when, on March 9, 2009, the S&P 500 Index hit its bear market low of 676. The index dipped as low as 666 that day, and having the number of the beast show up probably didn't stun many investors, given the personal hells many were experiencing at the time:
- Jobs were being slashed.
- Home prices were plummeting.
- Billions of dollars of wealth (albeit, paper wealth) had been wiped out.
That's why positive milestones should be celebrated as they occur. Yesterday, the S&P 500 closed at 1,332, meaning the index has virtually doubled since its bear market low. (In another positive note, these index figures are price-only and thus don't account for dividends, so we've really done even better than doubling.)
The point isn't that we're out of the woods (smart investors know this is never the case), nor is it meant to minimize the tough times many are still experiencing:
- Unemployment remains stubbornly high.
- Our federal deficit continues to climb.
- State and local governments are facing unprecedented deficits.
- Housing prices continue to fall in much of the country.
- Political unrest is spreading in the Middle East.
Perhaps you're one of the unfortunate investors who sold at precisely the wrong time. If so, consider this an expensive lesson in the importance of having an investment plan and sticking to it. This should serve as a reminder to ignore forecasters such as Roubini, Gross or El-Erian, for surely you will hear more clarion cries to get out of stocks. And remember Warren Buffett's classic quote: "A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting."
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