Market Anniversary an Occasion for Caution, Too

Many of the commentaries on this occasion are remarks on that longevity—some variation of “bull markets don’t die of old age” if they are of an optimistic bent. The vast majority of Wall Street professionals see stocks higher at the end of the year. But, with indexes clawing their way back to records set in January, it also should be a reminder of pundits’ fallibility.

The Charging Bull sculpture in New York's Financial District on Feb. 7. Photo: Richard Drew/Associated Press

On March 9, 2009, nobody knew that it would be the start of one of the greatest bull markets of all time. The Wall Street Journal ran a story that day with the headline: “Dow 5000? There’s a Case for It.” While hedging their bets, three strategists cited saw the S&P 500, which had hit its bear-market bottom of 666.79 a day earlier, possibly falling as low as 500 before the market recovered.

What is worth remembering is that, just 15 months earlier, investment seers were as spectacularly wrong but in the opposite direction. Stocks had hit their bull-market peak almost three months earlier, but their forecasts to kick off 2008 saw the same index rising as high as 1700. The two strategists from Bear Stearns and Lehman Brothers, firms that wouldn’t even exist by the end of that tumultuous year, had an average outlook of 1665. That was 87% higher than the actual year-end level for the index. Not a single brokerage firm was even forecasting a recession, though one already had begun.

None of this means that today’s benign consensus is wrong. Markets usually rise and bull markets don’t have an expiration date, so extrapolating the past is a smart career move—until it isn’t.

Write to Spencer Jakab at spencer.jakab@wsj.com