What Do the Bulls Know?

The stock market put on a spectacular show of defiance in 1991. Wall Street's bulls ignored the crushing weight of debt on the economy and the signs of a protracted recession. Every major stock-market index pushed into record-high territory. The Dow Jones average leaped 535 points to an all-time peak of 3168.83, a gain of more than 20% -- and for good measure, rose nearly 33 points during the first two days of 1992. The S&P 500 gained even more than the Dow during 1991, rising 26%, and NASDAQ, the most popular measure for small stocks, surged a record 57%.

The...