I caught a few business shows this week.
My question is, Whats with the fascination of the market hitting 2 thousand and ten thousand?
Is this a magical number that means something? Or is it , just a feel good number? Will this help with our economic woes?
zanny

 

I think a lot of the impact is psychological. As the stock indexes rise, consumers see this as a positive indicator that the economy is firming up. I think the 10,000 benchmark has people reminiscing about the "old days", just a few years ago. It's just one indicator, but it seems to be the one everyone wants to focus on.

 

Some see those numbers as proof that the Bear is dead and the Bull is back. It is my belief that we are seeing a short term Bull inside a long term Bear, but that's just my opinion. Numbers like 10,000 also stir an emotional response from buyers, supporting the rise.
Dono

 

Traditionally the stock market improves about six months before the overall economy improves. The improvement must be sustained. 10,000 for the dow and 2,000 (anyone remember the 5,000?) for the NASDAQ are numbers we haven't seen for months. When investors see positive news from companies, confidence begins to rise and money is shifted from cash to stocks. Believe me from experience, +2% at the bank is better than -20% or more on a lousy stock.

 

I'm with Dono on the tiny bull in a bear. Brokerage houses, fund and other institutional managers trade most all equity market stocks. For three years we’ve had no real economic growth, actually a decline, to add value to companies listed on stock exchanges. What most traders are doing is grabbing stocks that show promise of holding a higher earnings forecast and becoming stockholders of record to qualify for that dividend payment.

If you watch the stock markets and compare them with the government economic yardstick, the GDP, you’ll notice the market didn’t get real excited about the ‘sizzling’ 8.3% GDP increase touted by the administration and media. That’s because a majority of it was attributed to increases in consumer spending (almost 6%), government spending (1.5%) with the remainder a mix of business adjustments, not actual corporate growth providing business expansion and new jobs.

Our country is in a strange dilemma that doesn’t really offer more than inflationary growth to equity markets (which will eventually drive the Dow over 10k). The last big increases were from the dot.com bubble. We’re well on the way to becoming a service economy and our current administration has pulled out all the stops to encourage consumers to spend and keep that feel good/bad GDP number rising for the upcoming election. That invariably means consumers incurring additional debt for real property (housing is red hot because of artificially low interest rates allowing easy qualifying), vehicles with artificially supported interest rates and other personal property upgrading for the sake of upgrading. So what, other than payroll deducted savings plans and stock investments through those plans in 401k form, diminished by 2.8 million job losses, is left for savings and stock market investment? And what happens to the equity markets when consumers eventually become saturated with debt and begin pulling 401k money (stock investments) to meet living expenses?

Seems like a dirty trick, but Bush’s only real concern and goal is not suffering the historical fate of dada by not being re-elected due to a sagging economy. Regardless of what it costs us as a country, as individuals or in the equity markets, his handlers are going to use every feel-good number they can to convince the general public that we’re on the right track to secure the necessary votes. If the dollar holds up and inflation stays away until after the election, they'll have pulled off a scam on the public worthy of the Hollywood movie crowd productions neo-conservatives so thoroughly despise and blame for eroding our moral attitudes.

 

I understand what you guys are saying. But, don't you think you are being a little pessimistic? Forget the gdp.
Manufacturing is up, unemployment is falling, and durable goods orders are up.
For a company to invest in new equipment and machinery, they must see an upturn in business, in the near future.
I can't see a company investing in durable goods for no reason.
I also understand election year politics are playing a part.
zanny

 

Um, actually I didn't think I was being pessimistic. Zanny, you are correctly seeing thru the fog and making good and correct observations about what is really going on. The govt, regardless of which party is in office, can only do so much to stimulate the economy; it takes business and consumers too. These three entities are what contribute to GDP.

If anyone wants (ewwwwwwwww) to remember an example of an administration sitting in the background and just paying lip service to the public, think back to the days of the infamous "peanut hick" back in 1976-1980. Inflation was running around 18% and the bank was, if you were at the right bank/institution, paying you maybe 15%. It's no wonder people were saying to "spend your money today because tomorrow it will be worth less". Low interest rates encourage cunsumers and business to stimulate the economy. This is the climate we have right now; it's nothing to be pessimistic about but rather it's a great opportunity to take advantage of cheap finance if you need something.