IN THE 17 YEARS from the end of 1964 to the end of 1981, the Dow gained exactly one-tenth of 1 percent. That’s 0.1 percent. In the bull market that followed, from 1982 to the peak in March of 2000, the Dow rose from 875 to 11,723—a spectacular gain of 1,239 percent, nearly a 13-fold increase.
We all remember how difficult that first period was—three recessions, oil shocks, Vietnam, stagflation, the collapse of the Nifty Fifty, Watergate, short-term interest rates rising to 18 percent, gold at $800 an ounce, and very high inflation.
“Bad news on the doorstep,” seemed to be the theme.
What a contrast with the next period. Tax cuts and declining interest rates fueled a boom in the stock market and the economy. It was “Morning in America.” Computers entered our lives, helping us be more productive. By the end of the period, in 2000, even Alan Greenspan was extolling the virtues of technology-led productivity growth. Inflation became a nonfactor, and mortgage rates dropped almost as fast as property values rose. The Internet promised new ways to prosper. Peace seemed to be breaking out, and government budgets ran to surplus.
It stands to reason, doesn’t it, that the economy was doing poorly during the long bear market and far better during the bull market?
That is what one would think, but the fact is far different. From 1964 through 1981, while the stock market was piling up its 0.1 percent gain, ...