2013 is drawing to a close, and unless catastrophe strikes in its final weeks, both the Dow Jones Industrial Average (DJIA) (DIA) and the S&P 500 (SPX) (SPY)
will end the year at or near record highs. Though the year has been
marked by political turmoil in the US, stagnation in Europe, war in the
Middle East, crisis in India, and a host of troubles in East Asia,
stock prices have crept persistently and inexorably higher. Somewhat
oddly, this bull market is not being supported by any surge in economic
growth, nor does it seem to be causing one, which makes it appear
almost hermetically disconnected from the real world. It must be
allowed that the market is displaying some of the characteristics of a bubble.
Before you head for the hills, however, consider that the lackluster
economy is actually the strongest argument against the bubble
hypothesis. America is still taking up the slack in its economy created
by the highly destructive crash of 2008, and it will be doing so for
some time. Consumers, who were prone to wild fits of optimism in the
last economic cycle, have been chastened and continue to spend
carefully out of necessity. There was real consolidation and scaling
back in wake of the crash, and although this caused a second wave of
economic damage, it was necessary, and it is over now; things have been
moving in the right direction since early 2011. (more)
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