The Dow Hits A New Record High...But Hold Off On The Champagne

The Dow Jones Industrial Average closed at an all-time high yesterday for the first time since October 2007 but the response seems to be a collective "ho hum."

Why the muted reaction?  The economy is still struggling despite higher stock prices.  At the same time the market hit a new high household incomes hit a decade record low.   The situation is Europe isn't much different as the unemployment crisis becomes a political crisis.

Reaction to the Dow’s record high reminds me of two old men sitting together on a park bench.  One asks, “How come you never ask me about the business?”

“O.K. how’s the business?”

“Don’t ask!”

We are in a very different world than 2007.  Consider this:

Today vs. October 2007:

Dow Jones Industrial Average: Then 14164.5; Now 14164.5

  *   Regular Gas Price: Then $2.75; Now $3.73

  *   GDP Growth: Then +2.5%; Now +1.6%

  *   Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million

  *   Americans On Food Stamps: Then 26.9 million; Now 47.69 million

  *   Size of Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion

  *   US Debt as a Percentage of GDP: Then ~38%; Now 74.2%

  *   US Deficit (LTM): Then $97 billion; Now $975.6 billion

  *   Total US Debt Outstanding: Then $9.008 trillion; Now $16.43 trillion

  *   US Household Debt: Then $13.5 trillion; Now 12.87 trillion

  *   Labor Force Participation Rate: Then 65.8%; Now 63.6%

  *   Consumer Confidence: Then 99.5; Now 69.6

  *   S&P Rating of the US: Then AAA; Now AA+

  *   10-Year Treasury Yield: Then 4.64%; Now 1.89%

*   Gold: Then $748; Now $1583

We still have a ways to go.  As to the future none of us has a crystal ball.  We do, however, believe our planning based approach helps clients focus on long-term goals. 

What’s your take on the Dow’s record setting high?  Thank you for reading.  I would enjoy hearing from you in the comments section, at wlg@trustcoil.com or you can reach me directly at 630-545-3653.