Aug 2nd, 2009
In the End it All Works Out Logically–but Where’s the End?
John Bogle, the founder of Vanguard, makes a point with graph in his The Little Book of Common Sense Investing that while over the short term there are times when stock market gains do not correlate with business profits, when looked at over the long term, the two are in lockstep. Sometimes (think the dotcom boom of the late 1990s and early 2000s) the market gains exceed the business profits, and sometimes the profits exceed the gains, but in the end, things work out.
So where are we today? Publicly held companies have been reporting mediocre to “not a disaster” type results, yet the stock market has boomed–as of this writing, the broad market, measured by the S&P 500 index, is up 9.28% year to date, and its returns since its March 9 low is now 44.95%.
The two are not currently in lockstep.
That said, I’m enjoying the current upswing in the market. I just know, that like always, it’s not going to last forever.
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