For a while, investors acted as if every stock was above average. And companies that were in favor were wildly in favor. The risk in New Economy investors' enthusiasm is that at the height of the market, every possible piece of good news is factored in. Then when companies whose stock sells at sky-high multiples of their earnings announce even minor setbacks, their stock gets pummeled. In Old Economy days, the stock market was a source of stability.
People see a trend as it's happening and call or click their broker to chase the momentum.
But on the downside, it can turn a minor downtick into a major bloodbath. It's Different Forget the dotcom collapse. The first real slowdown of the New Economy has arrived. Again She says she's no angel, but America loves her anyway. 2001 Time Inc. All rights reserved.