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Financial Happenings Blog
Thursday, October 19 2006

The US market, measured by the Dow Jones Index, broke through the 12,000 barrier this week - a record high.  The reaction of a lot of people when investment markets hit a record high is that they must be overpriced.

The previous record highs that have been overtaken by the Dow Jones were in 2001 - 5 years ago.  Since then corporate profits had rebounded, and the market is far more deserving of a new record high.

What we know for sure is that, over time, all growth markets (Australian shares, listed property trusts, international shares) increase in value.  So we should expect that markets will keep on reaching record highs over time.  I am not saying that a market that is setting new records is not overpriced - its just that you can't assume that it is! 

Posted by: Scott Francis AT 05:12 pm   |  Permalink   |  Email
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