David Fleer
Bristlecone Value Partners, LLC
12301 Wilshire Blvd., Suite 320
Los Angeles, CA 90025 USA
Work 1-877-806-4141

Monthly Digest – March 2013

March 28th, 2013

US Stock Market Hits Record Highs – Does it Matter? Should You Care?

Early March brought a new all-time high for the Dow Jones Industrial Average index of large American companies. The closing value of 14,128 on March 5 topped the prior record high set in October 2007, nearly 5 ½ years ago. The S&P 500, a somewhat broader measure, is also within a few points of surpassing its all-time high of 1,565 (also in October 2007). Do these records mean anything significant for you? For the economy?

Yes – The stock market is an indirect and imperfect—but still useful—measure of economic health. More precisely, because stock prices mostly reflect expectations about the future, economists consider the stock market a leading indicator of broader economic health. The fact that the S&P 500 has rebounded 130% (!) since its crisis low 4 years ago is both a stark reminder of just how poor things looked at the depth of the crisis in early 2009 and also a yardstick of the broad improvement since then. Employment, housing, the banking sector – most if not all of the severely broken parts of the economy are much, much healthier today. The impact on individual investors is that many are now closer to being able to meet their retirement and other investment goals, which is a very good thing.

And No – By definition, the headlines don’t tell the whole story, and there’s a whole lot more to the story here. Should investors really be excited that the market is back where it was 5 ½ years ago? Or, for that matter, where it was 13 years ago at the end of the technology boom? Here are a few things to consider when reading the headlines. Read the rest of this entry »

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