Bear Sightings on Wall Street --- Getting Going: After the Pain, Don't Expect A Year of Gain
After stumbling badly in last year's treacherous stock market, many folks are betting they'll recoup their losses during 2001.</br></br>That, unfortunately, could turn out to be investors' next mistake.</br></br>The critical issue: In the stock market, do good years follow bad? Or are returns pretty much random, and thus one year's performance doesn't tell us anything about the next 12 months?</br></br>If you are looking for a quick snapback, history isn't very reassuring. True, Standard & Poor's 500-stock index bounced back smartly from its most recent two annual losses, those in 1981 and 1990. But after the declines of 1969 and 1977, we had years with modest single-digit gains. And, of course, 1973's drubbing was merely a warm-up to 1974's thrashing.</br></br>"One bad year does not foretell a good year," says William Reichenstein, an investments professor at Baylor University. He says "there is some evidence of mean reversion," suggesting results will drift back toward the average as good stretches follow bad, "but it's not overwhelming."