Why Is No One Talking About the Stock Market’s All-Time High?

U.S. stock markets* are flirting with all-time highs (it may happen today) but I am hearing and reading very little about it. Why is that?

I can think of a few possible reasons, and am eager to hear yours.

1. After the spectacular meltdown of 2007-2009, a lot of people are generally gun-shy and/or inattentive.

2. Since so many people sold into the teeth of the meltdown, and stayed on the sidelines since, a new high is to them relatively bad news.

3. Because the economy itself is not quite roaring, a roaring stock market doesn’t seem legit (unless, of course, you consider it a leading indicator, which it usually is).

4. Just “getting back” to an all-time high from more than five years ago is, at best, a muted victory.

All that said, I remain surprised by the lack of chatter.

*The Dow and S&P 500, at least; the NASDAQ is still a very long way off its tech-bubble high.

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  1. Marc says:

    Sequester has dominated the news and senses of most citizens.

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  2. Jim says:

    I would argue that the lack of excitement in the current “strength” of the markets is driven largely by the weak fundamental performance of the companies underlying the stocks. While nominal values are at all time highs, this has been caused primarily by multiple expansion, with little underlying earnings growth. Thus the appreciation can be largely attributed to the huge increases in liquidity resulting from the Fed’s balance sheet expansion.

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    • Kurt says:

      Jim, there really hasn’t been much of a multiple expansion. The P/E ratios for the S&P 500 and Dow Jones Industrial Average are both much lower than they were at the previous height of the stock market in 2007.

      The FED is pumping money into the economy, although there has been little perceived economic growth. However, companies are becoming more efficient and paying off their debts and shoring up their balance sheets. Their earning are at an all-time high, although it certainly isn’t clear whether this will last when the FED stops pumping.

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  3. Scott Sabol says:

    I believe its from QE 1 thru where ever we are now. That has injected liquidity into the markets but with very little trickle down into the mainstream economy. Way too many people still trying to deleverage…lots of homes still underwater.

    If employment were lower and GDP was higher, this would be bigger news

    Thanks

    Scott

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  4. Donald Pato says:

    The Fed is purchasing 85 billion worth of assets every month. Interest rates are in a medically induced coma, and have violently forced savers and would-be-bond investors into the stock market. This is an artificial, centrally planned market rally. I’m not buying it.

    It’ll be interesting to see what happens when the Fed starts unwinding, which it has already begun to murmur about. I do not want to have money on the table for that roll of the dice.

    I can’t wait for the day when savers and retirees can earn an honest rate of interest on their money without being forced into risky investments at the barrel of a ZIRP policy bazooka.

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    • Dave says:

      Where have I heard $85 billion recently? Hrm… ;-)

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    • Clancy says:

      “Savers” are not entitled to a high rate of interest, risk free, just for saving. The only ones who should be making interest are Investors. Banks pay (or used to pay) interest on savings accounts because they use the money to make investments (usually by making loans) acting as an investor on your behalf. Investing pays off when the investment causes economic growth. Piling up cash (or gold if you prefer) doesn’t help anyone or provide any economic benefit, so why should anyone be rewarded for doing it?
      Interest rates are so low right now because there are a dearth of profitable investments and an excess supply of “savers.” In fact, by most calculations the “natural interest rate” (the rate at which debt markets would clear) is still below zero, so by keeping the rate around zero, the Fed is holding it “artificially” too high.

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      • Impossibly Stupid says:

        So much is wrong with what you say that it’s hard to know where to begin. I guess we can start with you turning the OP’s “honest rate of interest” into “high rate of interest”. The fact is that most banks I see pay interest rates that are a *fraction* of a percent. In an honest world, they would at least have to pay a rate that matched inflation.

        But this world is dishonest, because banks don’t need *your* deposit of actual value to loan money. They loan out the fake (debt and deficit laden) value of the Federal Reserve. Interest rates are low not because we have an overabundance of savers, but because we have a population that is most easily controlled by making them wage slaves to their debt.

        And that ugly truth is why nobody is talking about the stock market. Corporate performance isn’t translating to (non-executive) employee gains. Wages aren’t at an all-time high. Unemployment isn’t at an all-time low. The stock market is yet another “inconvenient truth” that a lot of people would very much like to keep quiet.

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  5. Dan Fiore says:

    With the stock market, the trade trade deficit and long-term unemployment all at all time highs I think the public is generally skeptical of positive news from Wall Street.

    So I agree with your 3rd premise, but think there are other contributing factors beneath the skepticism of Wall Street success in a slow economy.

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  6. James says:

    I think it’s because an overwhelming majority of the people in the stock market are wealthy people. Your average joe, like myself, couldn’t even dream of putting money at risk anymore. So all this says to me is that the wealthy keep spreading the gap between us. I like to think of myself as middle class, my salary says I am, but I am pretty broke.

    It would be like caring about a sport without being able to watch the sport.

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    • Eric says:

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    • Enter your name... says:

      A lot of middle-middle class people have at least a little money in a retirement account, and much of that is invested in stocks.

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    • James says:

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  7. RandyB says:

    I would lean towards the assumption that quantitative easing has allowed those who first come in contact with the money to enjoy the benefits that there of. Which could be an indicator of problems to come. During our last financial crash a large influx of fiat capital created a sandy foundation. If the capital was due to real industrial growth, exports, or a new job industry then I would be excited. All around me I see people struggling to make end meet. I enjoy playing the market and my financial investments have done great since I entered the market in 2010; but what will happen during this next boom?

    “Financial markets have become stimulus junkies. They crave their next fix of quantitative easing and when they don’t get it they turn ugly. The rush they get from the drug wears off after a while, and then they become needy and whiny. Witness last week’s sell-off on Wall Street following the hint from the Federal Reserve that it was about to cut off the drug supply.

    A similar dependency exists in the UK, where stock market traders expectantly await an injection of QE, courtesy of the Bank of England, after deterioration in the UK’s economic outlook. Governor Sir Mervyn King voted for another £25bn of cheap money and his colleagues should endorse his view in the coming months. The loss of the UK’s much coveted AAA status, thanks to the credit ratings agency Moody’s on Friday night, is likely to make the markets salivate even more.” – http://www.guardian.co.uk

    We need to divulge ourselves of a currency so easily manipulated by private interests.

    We are slaves to a currency. We as individuals have no representation outside of our buying habits. Our citizenry is too ignorant to the facts about how currency is created, flows or even borrowed to participate in a conversation to solve the problem. I believe the population assumes a smart guy like yourself will spell out the problems in elementary terms to allows them the ability to decipher a solution. However, the problem is so complicated it takes hours of schooling just to understand the basic principals behind the problems in the first place. The lack of chatter is no surprise, media is a game to be played on the stock market. Most news changes the buying habits of individuals and thus becomes an extraordinary tool for influence. There is no growth only inflation. The inflation will trickle down to the small guys and then the media will find a new straw man to knock down.

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    • albanylandlord says:

      Scott’s Blog discusses the market manipulation that he believes in occurring to suck in investors before taking their money. Anyone who believes that there is some group that is controlling where the market goes is delusional to the point that nothing else they say matters much.

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