By Jason Zweig, The Wall Street Journal
The Dow Jones Industrial Average goes back to May 26, 1896. Richard Sylla goes a lot farther back than that.
Sylla, an economist at the Stern School of Business at New York University and chairman of the Museum of American Finance, is one of the nation’s most eminent financial historians. He is a natural source to put the Dow’s latest record in long-term context.
The historical perspective, Sylla tells me in this recent video interview, suggests that “if we’re lucky we may see a series of these all-time highs.” He adds wryly, “There are such things as bull markets.”
Sylla continues, “One thing I’ve learned in my many years of studying these things is that markets overshoot, both on the upside and the downside. They seem to go further than one might rationally expect them to go…a new all-time high is probably just a stepping stone to another one.”
Can the Fed sustain the low-interest-rate policy that has been gushing rocket fuel into the financial markets? “We’re in a kind of brave new world as far as central-banking policy goes,” Sylla says. “There hasn’t been any previous period where you’ve had interest rates being purposely kept very low [as a deliberate result of coordinated central-bank policy]…There’s not much precedent for that in history.” He adds, “We should be very skeptical of [the Fed’s] ability to get exactly what it wants.”