Despite Uncertainty, Markets Flirt With Record Highs
There’s no arguing that it’s a crazy time to be a market participant. It’s year five on the post-financial collapse calendar, and a global recession has changed Wall Street and the investment ecosystem permanently. In the United States, investors are digesting new regulations and a new tax architecture, re-evaluating post-crisis strategies and preparing to enter what could finally be predictable growth after years of volatile uncertainty.
But the political climate is as terse and uncertain as it has ever been. America dodged the fiscal cliff through a solution that is only elegant in its awkwardness. A tax agreement out of Congress that catalyzed a New Year rally has turned into a hostage situation where the debt ceiling is being used as a bargaining chip for spending cuts. Consumer sentiment in December crashed as a result.
But despite all this, the U.S. equity markets have pressed upwards for the past five years, and are now flirting with all-time highs. No one, not in Washington or on Wall Street, is happy with the way things are, but the economic engine must keep turning. Economic indicators in the U.S. and around the world suggest that while there is a long, difficult road ahead, the worst may, finally, be over.
Here’s a look at the major U.S. indices as they look to set new records…
The S&P 500 is up over 93 percent since March of 2009, which is about when the index hit its lowest post-crisis level. The index did trip over itself a few times, once in April of 2010, again in July of 2011, and most recently an October-November slide, but the obvious signs of an uptrend are there.
Average trade volume simmered down even as the index rose as levels normalized after the frenzy of trading caused by the crisis. Chartists, of course, are arguing back and forth about whether we’re in a bull market or we’re heading for another crash. It’s tautological that after every record high a decrease follows, and man observers are worried that the same thing will happen now as what happened the last two times the S&P was at 1,500.
Dow Jones Industrial Average
The Dow is also pressing against its pre-crisis highs near 14,000. The index is up nearly 12 percent over the past five years, but has rallied alongside the S&P since the bottom of the collapse. The index has climbed 87 percent since March of 2009.
The Dow faced one major, scary sell off at the end of July in 2011, and several minor once since. The Dow participated in the same October-November slump as the S&P, but has likewise surged heading into 2013.
The Nasdaq is defined by the dot-com bubble, and the index is a long way away from seeing its 2000 highs arpimd 4,5000. The dot-com crash bottomed out in the summer of 2002, and the Nasdaq climbed modestly until the end of 2007, when the crisis began to pull things down.
Ever since the 2002 low, the index has been in a general uptrend, but the tech sector has been in a clear rally since March of 2009. The index is up over 115 percent since then, and is substantially higher than its pre-crisis levels.