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What a difference four years and 10 months make. The Dow Jones Industrial Average pierced the 13000 level this week (Feb. 28) for the first time since the financial crisis melted down the stock market, among other things. The Dow’s maiden voyage across that mark (on the way up, that is) was April 25, 2007. Though it was spring on the calendar, the bull market that had begun in 2003, following the bursting of the dot-come bubble, was in the autumn of its years. The Dow had enough momentum to levitate to 14164.53 by Oct. 9, 2007, but the economy’s engine was beginning to flag even as 13000 was being breached. Indeed, in the very next month, May 2007, financial stocks would hit their high point, though their implosion was still a ways off. Housing prices already had reached their frothy peak the previous July, but their decline up to that point wasn’t panicking anyone. Consumer goods and health care stocks would reach their highs in November, a month after the Dow had started drifting lower. Economists say the worst recession since the Great Depression began in December 2007, and that 2008 will go down as one of the bleakest years in the Dow’s history, with the index dropping 34%. Now it is headed back up again, retracing more cautiously the ground it blithely skipped over nearly a half-decade ago. There is some reason for optimism among investors. The recession-ratcheted unemployment rate has ticked down to 8.3%, and U.S. economic growth in 2011’s fourth quarter was revised up to 3%. But there is reason for wariness, too. Europe’s financial challenges are by no means resolved and new Middle East tensions are already stoking fear-based boosts in oil prices. Perhaps the Dow itself best illustrates the difference between then and now. In 2007, the Dow blasted through 13000 to close that April day at 13089.89. This time, the Dow flirted with 13000 for a week before finally tiptoeing over the line, closing at 13005.12. And the next day (Feb. 29) it retreated. Once burned, twice shy.
2012 Economic Growth Fellow
John Prestbo is retired as editor and executive director of Dow Jones Indexes. Previously he was markets editor at The Wall Street Journal. He has co-authored or edited several books over the past 30 years. The most recent is “The Market’s Measure: An Illustrated History of America Told Through the Dow Jones Industrial Average,” published in 1999 by Dow Jones Indexes. His column, Indexed Investor, appears on the highly regarded “MarketWatch” business and finance website. He received his bachelor's and master's degrees from Northwestern University.Full Bio
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