Last Wednesday the Dow Jones Industrial Average crossed 10,000 for the first time in almost exactly a year. At the New York Stock Exchange traders screamed and confetti fell from the sky; anchors on CNBC even giggled with glee.
What does it all mean for the average Joe?
In a nutshell: absolutely nothing. It is just a number. Why was there no parade down Wall Street when the average hit 9,995, just .05 percent lower? Because it is just a number.
There is much rejoicing that the DJIA crossed the five-digit barrier, but it was a year ago that fear and panic were widespread when the average dipped down into four digits.
One headline from last October in The New York Times read: “Panicked Markets reel, Dow plunges below 10,000.”
On Thursday headlines read: “Dow 10,000: Relief and Recovery on Traders Minds.”
Clearly the overall direction of the market under both headlines was very different, but the same psychological barrier elicited two completely different, but very strong, feelings.
It should be noted that even though Dow 10,000 was a desired figure to reach to instill hope in the minds of rattled investors, it still is down 41 percent from its all time high two years ago of over 14,000.
Even more daunting is that it has been 10 years since the Dow crossed 10,000 for the first time in 1999. That means, on average, stocks invested in large-cap blue-chip stocks have returned exactly 0 percent in the last decade. That is lost valuable time for many investors’ portfolios.
Some food for thought on the economy in 1999 and today: GDP, a measure of economic output by the country is at $14.4 trillion as of 2008, it was $9.4 trillion in 1999. The unemployment rate is 9.8 percent today and was 4.2 percent a decade ago. S&P 500 companies combined earnings totaled $65.39 per share in 2008, up from $51.68 10 years ago. Finally, consumer confidence, a measure of consumers’ optimism about employment and purchasing opportunities in the future is down to 53.07 from 134 in 1999.
The economy is showing vast signs of improvement and many economists, including Federal Reserve Chairman Ben Bernanke, believe the recession ended sometime in the previous quarter. There is reason to celebrate economic recovery and overall market recovery, but Dow 10,000 is nothing more than a number.
Some people will argue that Dow 10,000 means the markets have flown upward far to fast, 50 percent since the March low, and that a correction is due.
If you look at the calendar however, the Dow is only up 15 percent on the year, and at the March bottom there was fear that two of the largest banks in the world, Citigroup and Bank of America, would implode and be nationalized by the United States government.
When that possibility subsided so did the fear, and up went the markets, a natural stock market sigh of relief.
Don’t focus on the level of the market and what number the DJIA obtains, but rather the overall economy, its condition and the market direction.
