Mankiw points out that it's been exactly 15 years since Greenspan gave his famous "irrational exuberance" speech.
He says the total return on the stock market has been 5.55% since then, slightly less than bonds. Using Shiller's data, I get total real
return on the S&P 500 as 2.68%.
More than half that total gain came in the 12 months following Greenspan's speech. I calculated 27.5% those first 12 months. In fact, the S&P nearly doubled in real terms in the next 3 years.
This has particular interest to me because prior to 1997 the only option in my employer's 401k was fixed interest. They first made stocks available in Jan 1997 (a high cost managed fund). At the time, P/E10 on the S&P was around 27. After years of wanting a stock fund, when they finally made it available, I decided to pass. I thought 27 signaled a pending collapse. So I missed the huge returns of the next few years. So much for my skills as a market timer.
Of course, I also missed the 10 years after that....
Greg Mankiw's Blog: 15 Years Later