Tuesday, December 23, 2014

Beautiful Stock-market Christmas Rally, Murkier Reality Below

The Dow industrials closed above 18,000 for the first time ever and the S&P 500 notched up its 51st record close of the year.  Today's surge to record highs comes after the government's strong report on GDP, up in the 3rd Quarter to an annualized 5% rate.   The result: a Dow at 18,024, an S&P 500 at 2,082, along with a NASDAQ (down 16) still at 4,765--only 235 below 5,000, near its insane high reached during the dot.com bubble of 2000. The three indexes total 24,871, and only because of today’s NASDAQ drop, are still 10 points below the combined all-time high for the three of 2,881.

The New Fox Index captures movement into stock market “outer space” first reached in May 2013, the escape velocity attained by soaring past old-time market theoretical limits of a Dow of 15,000, an S&P 500 of 1,600, and a NASDAQ of 3,500, for a total of 20,100. We are now shooting farther into deep space, way out at +4,771 (see inset).

According to “MarketWatch’s” David Weidner,
it’s been a good year. . .the S&P 500 Index has risen 12%. The Dow Jones Industrial Average could finish up close to 8% for the same period, and the Nasdaq should end the year with roughly a 14% return. Considering the past two years of gains, 2014’s run is even more remarkable. In the past five years, the S&P 500 is up 87%, the Dow, 73%, the Nasdaq, 115%.
Weidner, however, reminds us that
median household net worth [is] $81,200, a level that’s actually fallen 2% since 2010. This year household debt has risen between 2.3% and 3.4% each quarter, the most since 2007. . . The current average debt load for the U.S. household is $203,067, including credit cards (up 2.2% in the past 12 months), mortgages and student loans[, pointing] to a stagnation for most Americans. . . [T]he labor-participation rate remains 62.8%, the lowest since 1978. And among the working-age population, it’s just 59.2%. Wages, meanwhile, have risen 2.1% during the past 12 months, but that's just slightly above the 1.7% inflation rate during the same period.
Weren’t the “Roaring ‘20s” about an economy marked by technological progress, rampant inequality, a bubble stock market, and some basic economic weakness at home (then in agriculture, today in manufacturing), against a backdrop of unfixed trade issues and rising unrest abroad?

“Everyone's Looking Up, but Should Be Looking Down”

No comments: