Dow Flirts With 17,000, but Most People Missed the Ride

  • By Charles Passy, MarketWatch
  • July 03, 2014

Dow Jones

The Dow Jones Industrial Average is a hair’s breadth from crossing the 17,000 mark. But is that really reason to celebrate? The sentiment on Wall Street may be that our long national fiscal nightmare is finally over, but the stock market is just one barometer of prosperity, many economists and consumer experts argue. And the problems that have plagued the U.S. in recent years — declining household income, surging prices for many key goods and services, low interest rates for savings — remain very much in place, they say.

Add to that the fact that many investors started losing faith in recent years — and went to cash at the very time the market began its bullish run in 2009 — and an equally scary reality emerges: Market milestones may not reflect what many Americans are seeing in their monthly portfolio statements.

The bottom line: We’re still suffering a crisis in confidence — literally. The Consumer Confidence Index, which translates consumer views on the economy into a numerical formula, remains well off its historic highs. Today, the index stands at 85.2. By contrast, during the peak of the dot-com boom in 2000, the index registered as high as 144.7.

The news is not all bad, of course. The unemployment rate, currently at 6.3%, is well below its past-decade high of 10 percent in October 2009. And while consumer prices have climbed since October 2007, they have done so at a fairly modest clip. In the past year, for example, prices have increased by 2%, according to the Bureau of Labor Statistics.

Plus, many savers have seen respectable increases in their retirement portfolios over the past five years. Vanguard, for example, reports that the average 401(k) account balance rose from $56,000 in 2008 to $102,000 in 2013. And even factoring in contributions, Vanguard research analyst Jean Young reports that one study of 401(k) participants, conducted by the firm, showed an average annual return rate of 12.7 percent over the same five-year period. Granted, such a yield is nothing to write home about — by comparison, the Dow was up at least 20 percent in five of the 10 years during the ’90s — but Young adds that it’s a solid figure given the low inflation over the period.

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