Dow makes up what it lost to reach record high

The Dow Jones Industrial Average reached 14,253.77, a record high, going past the 14,198.1 it reached back in 2007, before the financial collapse.  Does this mean the stock market, at least is fully recovered, and that the financial collapse can be declared officially over?  Well, not necessarily.

From Bloomberg:

America, birthplace of the credit crisis that erased $37 trillion from global equity values, is leading the world’s stock markets back.

The Dow Jones Industrial Average (INDU) rallied 126 points to 14,253.77 yesterday, joining Denmark’s OMX Copenhagen 20 Index among major stock gauges in the 45 largest markets to regain all-time highs, according to data compiled by Bloomberg. Four years after bottoming, equity benchmarks in those countries are an average of 27 percent below their peaks, the data show.

About $10 trillion has been restored to U.S. equities, fueled by the fastest profit growth since the 1990s and monetary stimulus from the Federal Reserve. Retailers, banks and manufacturers led the recovery from the worst bear market since the 1930s as the Dow took less than 65 months to rise above its previous high set on Oct. 9, 2007, more than a year faster than the recovery from the Internet bubble.

“The U.S. has been ahead of other countries in terms of its ability to outperform since the crisis,” Jason Benowitz, who helps manage $4.5 billion at Roosevelt Investment Group Inc. in New York, said by phone yesterday. “The potential was there because it started here. It wouldn’t have been possible without the regulatory intervention.”

While the Standard & Poor’s 500 Index remains 1.6 percent from its 2007 high, American gauges including the Dow Jones Transportation Average, the Russell 2000 Index of smaller stocks and the S&P Midcap 400 Index have reached records. By contrast, the U.K.’s FTSE 100 Index has almost 8 percent to rise before regaining an all-time peak, while China’s Shanghai Composite Index must more than double.

The 116-year-old Dow jumped 0.9 percent yesterday, climbing above the 14,164.53 record closing level it reached before the global financial crisis and eclipsing its intraday high of 14,198.1 from Oct. 11, 2007. The gauge plunged 34 percent in 2008 for the worst performance in 77 years as the housing bubble burst and the financial system required a government bailout.

While the Dow has more than doubled in the four years since its bear-market low, its valuation remains 19 percent less than the price-earnings ratio at the previous peak and 14 percent below its 20-year average. Bulls say that’s a signal stocks have room to keep rallying, while to bears it shows a lack of confidence in earnings growth and concern over the Fed’s ability to continue spurring the economy.

via Dow Reaches Record as U.S. Joins Denmark Retaking Equity Peaks – Bloomberg.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • sg

    The number isn’t adjusted for inflation. Sorry. No new high.

    Jeff Cox@JeffCoxCNBCcom
    in inflation-adjusted dollars, the Dow would need to hit 15,731.54 to break the record.

    “https://twitter.com/jeffcoxcnbccom/status/308964507013750784″

  • kerner

    sg:

    Right. Our currency is worth so much less than it was in 2008 that I’m surprised that it took this long to get back to this point.

  • http://enterthevein.wordpress.com J. Dean

    Unfortunately, government will somehow try to take credit for this, one way or another, even though they have very little to do with regard to a healthy market in terms of proactive help.

  • Steve Bauer

    And yet, mysteriously, it is the government’s fault (andspecifically the president’s) when the market tanks. I’m just talkin’ generally here, regardless of which party is behind the wheel.

  • http://enterthevein.wordpress.com J. Dean

    Steven@4,
    You’re right. Government gets a little too much blame/credit for the market at times, and in particular with regard to unemployment. I have to laugh when I hear a President of any stripe talk about lower unemployment numbers as if he’s personally responsible for hiring them.

  • DonS

    sg is, of course, right. It’s not really yet at a new high, though the market clearly has recovered most of its losses over the past 18 months or so in nominal terms.

    Why is this? Corporations are lean and profits, as a result are decent. Additionally, there are few alternatives offering any kind of decent return. Money markets are basically like keeping your money under the mattress and bonds are a bad deal right now because interest rates will inevitably increase from their near-zero current rates. So the stock market is the default option, together with real estate, which is also beginning to rebound.


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