An investor who invested $1,000 in each of the Dow Jones Industrial Average stocks at the beginning of 2003 (a total investment of $30,000) would have been sitting with $39,615 at the end of 2003 (inclusive of re-invested dividends). A whopping profit of 32.1%.

Some Dow stocks did very well, and only four Dow stocks saw their share prices fall in 2003: Johnson & Johnson, Merck, AT&T, and Eastman Kodak. The big Dow stock winners were Intel (which doubled in price), Caterpillar (up 86%), Alcoa (up 71%), and J.P. Morgan (up 61%). Can you believe $1,000 invested in Intel at the beginning of 2003 was worth $2,076 at the end of 2003?

Most major stock markets around the world were up in 2003-- the biggest winners being the Brazil Bovespa, which rose 141%, and the Argentina Merval, up 134%. Even the NASDAQ Composite was up 50%. Most precious metals and commodities were up in 2003, led by a 20% increase in the price of gold bullion and a 43% increase in the price of lumber (1,000 board feet).

The only financial instruments that were down in 2003 were interest rates and the U.S. dollar. The Brazilian and Canadian currencies were the big winners against the U.S. dollar in 2003, with both up about 22%. Even the euro gained 20% in 2003.

But the markets are singing a different tune this year: Interest rates and the U.S. dollar are rising in value, while stock markets are falling in value.

If you asked analysts in January or February 2004 about rising interest rates and falling stock prices, they majority would have said it wouldn't happen. After all, with interest rates falling to a 46-year low, didn't stocks have only one way to go-up?

Similarly, at the beginning of 2003, when there was plenty of bearishness in the air, I believe few market watchers would have expected Intel stock to double in price, especially when demand for computers was falling. The market did better in 2003 than anyone had expected, maybe because only a few expected the market to perform so well last year.

In the same way that we entered 2003 with bearishness and the market reacted contrarily, I see the outright bullishness out there today as an indicator that, if stocks surprise, they will surprise on the downside. Just look at all the news coverage on the TV and in the paper. With interest still historically low, great growth in the U.S., and the best employment numbers we've seen in years, most analysts are very bullish.

But the stock market never does what's expected of it. Never has, never will. This is the Contrarian Theory at work.