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Oct. 22, 2006 Everyone seems to be excited by the fact that the Dow surpassed its previous high from several years ago to set a new high this past week. Such excitement is unwarranted at this point. Why? Because inflation needs to be factored into the figure. Factor in inflation and the Dow is still far below its past high point . In fact using the CPI (Consumer Price Index) as a proxy for inflation, the Dow is still 19% below its high of over half a decade ago. The Dow, however, is not the best proxy for the economy. That honor belongs to the S&P 500, of which comprises roughly 90 percent of the United States economy. The S&P 500 is 12% below its previous high, which was reached in spring of 2000. However, that also needs inflation factored in, and when it is, the S&P 500 is some 33% below its all-time high water mark. That’s a big percentage. And then there is the NASDAQ. The NASDAQ hit an intraday high in early 2000 of 5400, and closed just under 5100. Currently the NASDAQ is 60% to 70% below its inflation adjusted high (intraday or closing point, your pick), still tremendously under water from where it was. Looking at the markets from this more realistic angle gives better perspective on all the frenzy about the Dow, which consists of just a few companies, hitting a high number mark. ------------ About the author: Dwayne Hines, Certified Personal Trainer, currently has 12 books selling in major bookstores and writes for major magazines such as Physical and FitnessRX. Email Dwayne Hines: dhines@cpu-net.net Comment on this article here! ------------ All articles are EXCLUSIVE to Useless-Knowledge.com. Please link to this article rather than copying and pasting it onto your site (which would be unauthorized and illegal). |
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