Then the price of a stock reflects its real value, the value of all the present and future profits of the firm put together. Those who believe this say that all the downsizing, reengineering, etc., of the early 1990s is paying off today, plus the reforms of the Reagan era. Just for the sake of the argument, let's grant that cutting jobs improved efficiency by getting rid of the fat, and that the Gipper's policies were really good for the economy. Doomsayers are nearly always right in the long run but nearly always wrong in the short run. Because of their repeated failures, people ignore the doomsayer.
People have short memories that is a fact.
We forget that stock booms have happened before, fueled by euphoria about an unstoppable market, and followed by stock crashes. So we speculate in stocks after a while, the market crashes. Over the last few years, people have being putting their money in the stock market. Demand has risen, and so have prices. The more prices rose, the more people came to the market, so prices rose more.