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Yesterday at 4 p.m. Eastern Daylight Time, the Dow Jones Industrial Average made history.
The 118-year-old average of 30 stocks closed at 16,580.84. That topped the previous high, reached about four months ago. Not only that, but the benchmark index has now more than DOUBLED from its recession low below 7,000.
But did you see anyone break out the party hats?
Did you talk about this event around your dinner table?
Did the TV networks make major hay of it on their 6 p.m. broadcasts?
Heck, it seems to me like hardly anyone even noticed, much less made a fuss! It’s completely unlike what I remember about the party atmosphere when the Dow first crossed 10,000 in March 1999. Or like the huge real estate industry celebrations we saw in the mid-2000s, when home prices were setting all-time records and everybody and his sister was flipping condos!
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| The Dow hit a record high yesterday, and no one seemed to notice. |
So what gives? I’ll tell you what I think:
The Average American Isn’t “Feeling” the Gains
First, many stocks are lagging behind the Dow’s advance. You can see this by comparing the much broader Russell 2000 against the Dow. It’s hovering around 1,120 — almost 100 points below its high from two months ago. The Nasdaq Composite is also a few hundred points below its early-year high.
Second, in this advance, sectors like utilities and consumer staples have been leading the way. Heck, some of these utilities are trading like dot-coms, not stable, staid names you usually find tucked away in widow and orphan portfolios!
To cite just a couple of examples, NextEra Energy (NEE) has surged 17.5 percent year-to-date, while Dominion Resources (D) has soared 15 percent just since late January! General Mills (GIS) has risen 7.9 percent year-to-date, while Kellogg (K) has jumped 18 percent from its early 2014 low.
| “Yesterday at 4 p.m. Eastern Daylight Time, the Dow Jones Industrial Average made history. [But] Heck, it seems to me like hardly anyone even noticed, much less made a fuss!” |
Third, many investors seem unwilling or unable to trust the gains. They’re still scarred by the two epic collapses we’ve seen in the past decade and a half, and they’re unwilling to take on risk. They’d rather hide in pathetic-yielding bonds with immense price risk than take a chance on stocks, even as that may be one of the biggest investing mistakes possible!
If the wealth were being spread more evenly around, rather than going mostly to the one-percenters, we’d all be celebrating more. If government regulation and monetary policy were helping growth, rather than hindering it, we’d dust off those party hats. But it just doesn’t seem like an “all-time high” economy for many of us.
Fourth, the Fed’s “trickle down” monetary policies aren’t trickling down!
Sure, people are making some money on their houses and stocks. But nothing like what we’ve seen in the past. They’re not getting big wage increases either, and they’re experiencing much worse inflation in their real lives than the Ivory Tower economists keep talking about.
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If anything, Fed policy is hurting growth by restraining lending and spending. As reader David noted on the blog recently, “The bank’s reserves vanished in the collapse of housing loans … Importantly, inflation and growth are low since the interest is not going to savers who would spend most of it. That spending would be supporting the economy.”
What do you think? Does your portfolio reflect the all-time high in the Dow? Are you spending more because your stocks are going up? Or are you struggling to stay afloat even now, more than five years after the end of the Great Recession? Hop on over to the blog to let me know.
| MARKET ROUNDUP |
Here’s a quick recap of the OTHER important news of the day …
 More merger and acquisition talk is sweeping through the market. AT&T (T) has reportedly made overtures to DirecTV (DTV), with any deal possibly worth around $40 billion. Sprint (S) is also after T-Mobile US (TMUS), a transaction that could run $50 billion or more.
You’d be amazed at how much money you can save just by standing up and saying “I’m mad as hell, and I’m not going to take it anymore!” By making a personal round of calls after getting fed up with my high monthly bills, I got enough discounts to save me around $80-$100 a month!
If you have any tips to save money like that, please do share them.
Tomorrow is the biggest economic news release of all — the April jobs report. Forecasts call for 210,000 jobs to have been created last month, up from 192,000 in March. The unemployment rate is expected to drop to 6.6 percent from 6.7 percent.
Reminder: If you have any thoughts to share on these market events, don’t hesitate to use this link to put them on our blog.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
