The total return of the US stock market is comprised of capital gains, losses and dividends. The total return of the full-cap Wilshire 5000 closed up 0.88 percent yesterday and is within 3.0 percentage points of this high. It also happens to be 3.0 percentage points above the pre-crash 2007 close.
Investors of broad US index funds such as the Vanguard Total Stock Index Fund (VTI) are 3.8 percentage points below this all-time high. The 0.8 percent shortfall between this fund's performance and the Wilshire 5000 is due to:
An expense ratio, currently at 0.07 percent annually.Media Returns
The fact that VTI doesn't include the smallest of the micro-cap stocks that were the best performing of US stocks.
By contrast, the S&P 500 index is still 13.9 percentage points below its all time-high of October 9, 2007. This 10.9 percentage point shortfall from the Wilshire 5000 is mostly comprised of dividends carved out of the index. A smaller part comes from the fact that mid-sized and small companies outperformed the largest 500.
I asked Mint.com writer, Matthew Amster-Burton, why most of the media likes to use indexes stripped of dividends to represent the stock market. He responded that a pure index like the S&P 500 was expected and didn't require any additional explanation to readers. He noted that the financial services industry has a vested interest in the media continuing to use the raw S&P 500 index since it is so easy to beat.
What this means
Unless you were in a 100 percent stock portfolio, you should be at an all-time high today. If not, expenses and emotions are the likely culprits.
Will the US stock market hit an all-time high? My answer is a definite yes, just like it was on March 9, 2009, when US stocks had lost 55 percent of their value. Though admittedly I had no idea it would approach a new high so quickly. Fast forward to today, and I still have no idea when it will happen, I just know it will happen and I'll write about it when it does.
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