But that happened five years ago and stocks have just kept climbing. As in the 1950s, investor behavior has helped make a traditional market measure less relevant. Current tax law treats interest income such as dividends more harshly than gains from capital appreciation, which occurs when a stock rises. So, many investors prefer returns from capital gains to those from dividends. Corporate America has obliged by using excess cash to buy back its own stock instead of distributing it in the form of dividends.
Investor behavior has other effects on the market.
From 1925 through 1997, small stocks outperformed big stocks on average by nearly 5 percentage points during the month of January. And that's exactly what has been taking place. There was no January effect at the start of this year, nor for the previous four years. Changing economic conditions can also skew investors' view of market history. That's the highest level ever, according to Jeffrey Applegate, chief investment strategist at Lehman Brothers.