An Important Difference Between The All-Time-
High Stock Market Today And The
Dotcom Bubble Of The 90's
The S&P 500 surged and set a new all-time high on Tuesday. Without looking below the surface of the nominal number of the index, some folks will attempt to compare what we're seeing today to what we saw before the crash of 1929 or 2000 or whenever the stock market last fell after hitting an all-time high. "In many meetings we've had with investors, really starting last fall, the phrase “bubble” or year 1999 has been referenced as relevant," wrote Morgan Stanley's Adam Parker. " The “price to opportunity” and “price to eyeballs” metrics that appear to be justifying recent tech deals and software and internet valuations are fueling this sentiment."
You hear it all the time these days – “There is a relentless bid underneath this market just waiting to buy every single dip…” and you can’t really argue with the statement itself. The dips have become shallower and the buyers have rushed in more quickly each time. Sell-offs took months to play out during 2011 – think of the April-October peak-to-trough 21% decline for the S&P. In 2012, these bouts of selling ran their course in just a few weeks, in 2013 a few days and, thus far in 2014, just a few hours.
Americans have been spending less and less of their disposal income on food, American Enterprise Institute's Mark Perry points out in a new post. "With a three-fold increase in productivity since 1950 for growing wheat, four-fold productivity increases for growing soybeans and producing milk, and a six-fold productivity increase for corn, it’s not surprising that food affordability in the US is at an all-time high, when measured as a share of all consumer expenditures and as a share of disposable personal income," Perry concludes.
With the reduction of tensions on the Black Sea, global markets rallied yesterday to multi-year highs. In the U.S., the S&P 500 closed at an all time high of 1873.91. Other markets set new multi-year or all-time highs as well. The world is breaking out. The day’s trades had barely closed, when the Johnny one-notes began their usual litany of complaints. The market is long in the tooth, we are told; the bull cycle is Fed-driven, it's temporary, its “toppy.” Then there is my favorite complaint: All time highs are dangerous, a sign of a market that has gone too far. (Subtext: Get out now!)
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