Someone has said "If you want to predict future, look into past". And when it comes to investing, studying history and psychology is more profitable than studying finance and accounting (that is also required but without understanding basic human traits, numbers can fool you)
So let's look at recent past when economy came out of last dot.com induced downturn.
- Sept 2000: S&P at 1520; Oct 2007: S&P at 1556
- Mar 2003: S&P at 829; Mar 2009: S&P at 684
- Dec 2003: S&P at 1096; Dec 2009: S&P at 1100
As you can see, the levels are so much similar - only difference is that last time markets went from high to low over the period of 30 months whereas this time it happened in 18 months.
So looking at 2004 and 2005, let's predict what could happen in markets over next couple of years:
- Mar 2004: S&P at 1156; Prediction: S&P could be 1150 to 1200 by Apr 2010
- Summer of 2004: S&P at 1050; Prediction: S&P could test 1050 by summer of 2010
- 2004 year-end: S&P at 1212; Prediction: S&P could be 1200-1230 by 2010 year-end
- 2005 year-end: S&P at 1250: Prediction S&P could be 1250 to 1300 by 2011 year-end
If these predictions came true, we are looking at gain of 5 to 10 % in one year and 12 to 18% in 2 years. Not bad if we know in advance !
So while there would be quite a bit of volatility in the markets over next 12-24 months, if you believe long-term trends are towards upward direction, just relax, invest at regular intervals and enjoy your holidays.
Cisco celebrated it's 25th Birthday - here is small video which Yash and Isha created.
Have a great week !
/Shyam
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