Many commentators are freaking out about a new Barron’s headline celebrating the arrival (actually return) of the Dow Jones Industrial Average passing 14,000.We’ll refrain from singling any one out.
But the belief is that the following from Barron’s means the market is about to tank: “We told you so. In October, we predicted the Dow would pass its 14,165 record by early this year. Now we’re just 1% short. Expect a breakthrough soon. Here’s what happens after that.”
More generally, there are people who get nervous any time there’s an article talks about a new bull market, or how everyone’s into stocks, or how we’ve just breached a new era.
Basically, there are a lot of people who reflexively get negative, just because people have turned bearish.
As Josh Brown has noted, this so-called “headline” or “magazine cover” risk is total nonsense. A magazine cover is just a magazine cover. A headline is just a headline. A big benchmark is just a big benchmark.
We went through the history of the Dow, from the 1960s to today, to prove why this is complete hogwash.
For the sake of this feature, we can trace the first headline risk debunking to the May 31, 1963 issue of Time. It talked about a rising US economy.
But depending on your time horizon, swallowing this 1979 cover would have done bad things to your portfolio.
Technically the Dow went down after hitting 2,000 — but you were going to have to wait nine months for it to do so.
Now, it's true that our argument is not foolproof. This headline from Dow 11,000 would have messed a lot of people up.
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