It’s official. The Dow Jones Industrial average has finally risen above it’s previous record set in January, 2000. It’s taken almost 7 years. It closed yesterday at 11,727. Given the way things have been going I don’t expect it to rise above that level for a while, but I could be wrong. I listened to the news and analysts are attributing the rise to the slump in the housing market.
The analysis before was that the reason the Dow had not recovered for so long was that people were putting their investment money into the housing market, due to the low interest rates. This was driven by the Fed, which lowered those rates when the stock market took a large plunge in 2000, and the recession had hit. The stock market was considered too risky with the shams pulled by Enron, Global Crossing, and WorldCom. The Fed wanted to encourage borrowing, and that’s what happened. Since interest rates have been rising, and so have land values, the housing market topped off earlier this year. And investors have been looking for someplace else to put their money. As the article I link to notes, some of the commodities have been falling. Oil and gold have both fallen off their highs. So now investors are probably putting their money in the only place they feel they can continue to make some money: back in the stock market.
