U.S. stocks hit another all-time high

The Dow soared 244 points to close at 13,292 - the highest since December 2007. Anthony Mason reports on what's driving the stock prices so high.
Spencer Platt

(MoneyWatch) U.S. stocks eked out another all-time high yesterday, as measured by the Vanguard Total Stock Market Index Fund (VTI). The fund rose 0.42 percent on Wednesday, slightly eclipsing the previous high set last Friday. 

If you had invested $10,000 in this total stock index fund on the pre-crash high on Oct. 9, 2007, as of yesterday you would have $10,446.10. That calculation is based on the total return, letting dividends reinvest. A few fun facts regarding this fund:

  • Up 4.5 percent from its pre-crash high on Oct. 9, 2007
  • Up 11.3 percent from year-end 2007, the highest year-end close ever
  • Up 16.2 percent year-to-date
  • Up 134.5 percent from the market bottom on March 9, 2009

By comparison, the S&P 500 Index, which strips out dividends and excludes smaller companies, is still 8.2 percent off the Oct. 9, 2007 high. Many incorrectly use this number to show market returns, implying that beating this index is equivalent to beating the market.  

AP Gets market return wrong again
Silliness of the Dow Jones Industrial Average
Why you didn't buy stocks on sale

Gains in perspective

Granted, the gains from 2007 are pretty modest. That is until you put them in perspective of what has happened since then. Stocks are slightly higher in spite of:

  • The worst economic recession since the great depression
  • The collapse of giants like Lehman Brothers and General Motors (GM)
  • Global debt crisis that may yet take down governments
  • The downgrade of U.S. debt by Standard and Poors
  • Dysfunctional politicians that have become more concerned with making the other party look bad than with governing

I could go on and on as to why the stock market should be far from the record territory it is now, but the bottom line is that capitalism is far more resilient than many think. 

It appears Vanguard founder Jack Bogle was right when he said in offering investment advice, "Don't do something, Just stand there." 

  • Allan Roth On Twitter»

    Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.