Like all good things, the performance-enhancing policies must come to an end.
Four years after the stock market hit bottom, it is flirting with an all-time high. On Monday, the Dow Jones industrial average enjoyed its second highest close ever and was just 37 points away from a new record — more than double its level during the dark days of March 2009.
The turnabout is testament to healthy corporate profits and the resilience of America’s free enterprise system. And it’s a huge relief to workers whose 401(k) plans are tied to equities. But the risky little secret of the rebound is that it is powered in significant part by the easy-money policies of the Federal Reserve, which must one day end…..
Markets are headed for a ”watershed moment,” in which investors realize the economy “is finally breaking away from trend growth and the days of [quantitative easing] are numbered,” analysts at Societe Generale said in a lengthy and detailed note that delves into the ramifications for that realization for everything from the dollar to commodities to risk assets.
The impact across asset classes, however, may depend on whether bond investors gradually push yields higher or panic over the implications of the Fed’s eventual exit from its ultra-easy monetary policy, they said.
The IBD/TIPP Economic Optimism Index fell 10.8 percent in March to 42.2, down from 47.3 in February.
A reading below 50 indicates net pessimism.
“Americans across-the-board think that the economic outlook is grim,” said Raghavan Mayur, president of TIPP.
“The big slide in our economic outlook sub-index perhaps signals a turning point and an impending entry into a recession. This month sixty percent believe that the economy is in a recession.”
CHAPEL HILL, N.C. (MarketWatch) — Too many investors are getting carried away in their excitement about the Dow Jones Industrial Average’s return to the vicinity of its all-time high from late 2007— and therefore overlooking a depressing fact:
Even though the Dow (DJI:DJIA) succeeded in eclipsing that high, it still provided investors with a zero return over the last five and one-half years. Coupled with the bursting of the Internet bubble at the turn of the century, this means that even the market’s longer term returns are well below average: Over the last 15 years, for example, equities have produced a total return of less than half their historical norm. Read Market Snapshot “U.S. stocks rally to lift Dow to new heights.”
What’s all the excitement about?
I concede that it may be poor form to remind everyone of these historical realities just days before the bull market will be celebrating the fourth anniversary of its birth. But that’s the job of a contrarian. If everyone were instead depressed and complaining that stocks are a worthless investment, a contrarian would instead be celebrating the market’s many impressive achievements. Hedge-fund legend Stan Druckenmiller says this will “end very badly.”
But that’s definitely not the case now….
“Mission Accomplished” – “we all know it’s going to end badly, but in the meantime we can make some money” – ZH translation: “just make sure to sell ahead of everyone else.”
When Debbie Bruister buys a gallon of milk at her local Kroger supermarket, she pays $3.69, up 70 cents from what she paid last year.
Getting to the store costs more, too. Gas in Corinth, Miss., her hometown, costs $3.51 a gallon now, compared to less than three bucks in 2012. That really hurts, considering her husband’s 112-mile daily round-trip commute to his job as a pharmacist.
Bruister, a mother of four, received a $1,160 raise this school year at her job as an eighth-grade computer teacher. The extra cash — about $97 a month, before taxes and other deductions — isn’t enough for her and her husband to keep up with their rising costs, especially after the elimination of the payroll tax break. Its loss shrunk their paychecks by more than $270 a month.
“If you look at how much prices are going up, you get in the hole really quick,” Bruister said. “It’s a constant squeeze.”
In the wake of the Great Recession, millions of middle-class people are being pinched by stagnating incomes and the increased cost of living. America’s median household income has dropped by more than $4,000 since 2000, after adjusting for inflation, and the typical trappings of middle-class life are slipping out of financial reach for many families.
specter of the return of the euro crisis is never far away. Not a single problem in the currency zone has been definitively resolved & some are questioning if the European Central Bank might have to intervene again.
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