1995 Year-End Review of Markets and Finance --- Review of the Stock Market: Stocks Remain Ready to Ramble Higher, But a Renewed Raucous Rally Is Unlikely --- By Dave Kansas Staff Reporter of The Wall Street Journal
What a ride! With the economy behaving in almost perfect fashion, stock prices enjoyed some of their strongest gains in years. After opening the year in a pessimistic mood, investors turned joyous as the Dow Jones Industrial Average charged through the 4000 and 5000 milestones before the end of the year.</br></br>By year end, most every investor had reason to smile. The Dow, up 33.45%, edged out most of the mutual funds, but even those laggards had a good year. And all these gains came with little queasiness. According to Ned Davis Research Inc., Nokomis, Fla., the Dow's biggest correction in 1995 was a record low 3.3%. In addition, Ned Davis Research says the Dow, which hit its last bear market bottom in October 1990, has put in its longest run ever without a 10% correction.</br></br>But the spectacular year required something akin to a razor's edge dance by the economy. The enriching combination of modest growth with good profits -- the so-called soft landing -- came about despite a great deal of cynicism that it could ever happen.</br></br>Can that perfect combination continue? Most analysts now say yes. Sort of. Few expect another raucous year with gains of more than 30%. Instead, the bull market will have a return to normalcy, with consensus expectations hovering around a 10% return for the year.</br></br>Of course, it must be noted early on that many chin-scratchers erred badly in their 1995 outlooks a year ago. The consensus expected some sort of correction in the stock market, with prices moving higher later in the year. But hardly anyone thought the Dow would cruise past 5000.