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| CNN's depiction of the Dow over the past twenty years |
The Dow was hovering around 13,000 points in 2008 before it crashed to a low of 6,547.05 points. It finally reached 13,000 points again, surpassing pre-crash levels, in February of 2012. On February 1st of this year, the Dow reached 14,000 points again for the first time since October 2007.
While this is certainly a good sign for the American economy, the death throes of the 2008 recession seem to still to be having an impact upon our economic growth. The U.S.'s GDP ended the fourth quarter of 2012 with only .1% of growth for, and unemployment is currently estimated at 7.7%.
So where do you guys think the U.S. stands now economically? The Dow certainly isn't the end-all be-all economic indicator, but it can surely give us some idea what is currently happening with our economy. Should we be rejoicing and praising Wall Street's good fortune? Or do the cynics amongst us see this as a good sign, but one that certainly shouldn't make anyone sit back, nod smugly and proclaim, "Yup, that'll do it. The economy is all fixed now folks."
Somehow, I doubt Washington is going to sit back and relax any time soon. President Obama was able to have a productive discussion with House Republicans today on the budget. The Republican response was generally positive, and they collectively agreed that they didn't agree with President Obama on much of anything, but nonetheless appreciated the meeting.
In short: Dow Jones has a 9-day record of gains. Good news or REALLY good news?
6 comments:
I think the performance of the Dow Jones this past week is particularly ironic, especially considering the recent sequester. It should be noted that the sequester came into effect on March 1st, yet stocks seems to be doing more than ok. Economists predicted that our economy would somewhat tank if the federal budget was not solved. Perhaps the economy will suffer in the near future, but right about now everything seems just peachy. What better indicator of the progress of our economy is there than stock prices, especially Dow? It seems to me that American business is not feeling the predicted negative repercussions of the sequester, though the nation as a whole definitely is or will be soon. My economic education is severely limited so perhaps there is an economic concept that explains this irony, but until I learn something of the sort, I chuckle every time the Dow hits another high.
The point increase is absolutely nothing to get excited over. As pointed out in this post from the Washington Post, and this one from Reuters, the Dow is not an accurate measure of the status of the entire market. Sure, it indicates some consumer interest in dipping back into the market, but it by no means promises a revived economy. The media's attention to the increase seems unnecessary in this amount; perhaps they are excited about creating infographics that point up rather than down.
This chart on NPR's Planet Money gives a much less encouraging picture of today's economy: http://www.npr.org/blogs/money/2013/02/15/172116698/the-scariest-job-chart-ever-isnt-scary-enough?utm_source=NPR&utm_medium=facebook&utm_campaign=20130307
I think what it comes down to is that while upward fluctuations in the stock market are great for the jobs of people who work in the stock market, when it comes to applying miniscule movements in the DOW Jones to real world economic outcomes, little changes in stock prices aren't going to be affecting anyone's day to day.
Yeah, whoop-dee-frickin-doo. The Dow hasn't been a proper marker for our economy for a long while, so while it is good that it's gone up, it does not fully coordinate with our 'thriving economy.' Remember when we lost our A grade loan rating or whatever several months back and the stock market went up then? The stock market is not always (if hardly ever, nowadays) correlated to current events. The fact that people are willing to invest in stock is good; it means they feel financially stable enough to do such a thing. So, basically, what is my reaction? Meh.
In my opinion, although gains in the Dow are supposed to be representative of at least a portion of the market and economy, these continual gains aren't actually depicting the state of the American economy as a whole. I don't know, but to me it feels like these gains are almost artificial, traders with large holdings are inflating the market for personal gains and in effect, indirectly convincing others to believe in the upward movement. However, when the time comes, they will let go of their own shares to make a quick buck and let the market tumble back down to its acutal equilibrium. In short, yes these gains are a nice boom for the Dow...but at this rate of growth, sooner or later a bust will come along again.
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