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!
|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.
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.
Speaking of DirecTV, cell phone companies like Sprint, or Internet service providers like Comcast, here’s a piece of advice: Call and ask them to lower your bill! Talk about how you need to cut expenses and/or how other companies are offering deals that are enticing enough to get you to switch providers.
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.
Jobless claims rose by 14,000 to 344,000 in the most recent week, the highest since late February. But the ISM manufacturing index rose to a better-than-expected 54.9 in April from 53.7 in March. Personal spending also surged 0.9 percent in March, the biggest gain in almost five years. Incomes rose 0.5 percent — the most in seven months.
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.
The Ukraine crisis keeps on simmering in the background. Russia’s Vladimir Putin told Angela Merkel of Germany he wants Ukrainian troops out of that country’s eastern zone. No word on what he’ll do if they don’t pull back. But it raises the risk of a big flare up in risk.
More lousy weather is sweeping through the East, with big flooding in Alabama and Florida and record-setting rainfall in the Mid-Atlantic. That comes on the heels of a wave of thunderstorms and twisters that killed more than 30 people a few days ago. By all means, stay safe folks!
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,