This Is Not a Prediction

STOCKS DELIGHT IN MAKING FOOLS of short-term market forecasters. That’s why I don’t just avoid predicting the stock market’s direction. I also try to avoid even the appearance of making a prediction. But this week, I’m on thin ice.

With my latest column, I argue that stocks are unlikely to return to historical average valuations, except in a severe bear market. That might seem like good news, but it means long-run returns will probably be lackluster, because we’re starting from such rich valuations.

The danger with this sort of column: It gets published, the Dow Jones Industrial Average promptly plunges 20%, the nuances of the article are ignored and the author is held up as a complete idiot. So the story gets published this morning on WSJ.com and the Dow industrials immediately tumble 195 points. Fortunately, that’s only a 1% decline. Another 19% and you’ll find me in the fetal position.