Is this observation from 1994 still relevant?

Dear Reader, Peter Lynch, the legendary stock picker who ran Fidelity's market-beating Magellan Fund for 13 years, made an interesting observation in a speech he gave to the National Press Club back on October 7, 1994. "Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years. So I think — the market is about 3,800 today, or 3,700 — I'm pretty convinced the next 3,800 points will be up; it won't be down. The next 500 points, the next 600 points — I don't know which way they'll go. So, the market ought to double in the next eight or nine years. They'll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That's all there is to it." When he says "the market," Lynch is referring to the Dow Jones Industrial Average, which closed at 3,797 on the day he gave the talk. If you compound that by an 8% growth rate over 27.5 years, which would get you to the present day, then you get 31,520. The Dow closed Friday at 34,818, which is pretty darn close. Let's be clear, Lynch was not predicting the precise point of the market in March 2022. He was talking about how markets trend over longer-term periods while acknowledging short-term volatility. If you allow him some margin of error to account for unpredictable short-term swings, then you may be able to better appreciate how his thoughts speak to some fundamental market truths we often discuss. There's been some noise in the market recently. But over time, earnings have been increasing. It's becoming more and more apparent that stocks go where profits go. So, now is the time to tune out all of the market noise and chatter and stay focused on your long-term strategy.

Andrew Graham Editor, Silver Ridge Market Report

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