With today’s economy, if the current president’s last name were Clinton or Kerry, we'd already be coining money with his face on it.
Autumn has ushered in a historic month on Wall St. The Dow Jones Industrial Average broke an all-time record high, and it has been posting unprecedented numbers almost on a daily basis. Meanwhile, the Standard & Poor's (S&P) 500 is closing in on its own all-time record.
So what does all this mean?
The Dow is a market index containing 30 of the largest public American companies, and the S&P hosts 500 of the most widely-held ones. These indices act as a barometer for the overall economy and provide us with a good snapshot of it.
But talk to the average Joe 6-pack on the street, and you’ll probably hear all about the ‘happy-go-lucky’, ‘worry-free’ 1990s. In reality, the 90s economy was a shaky house of cards; things appeared robust, but beneath surface, nothing of any substance supported the economy. Hence the stock market crash of 2000. The quasi-bull market of the 90s was nothing more than a fleeting tech market bubble (i.e. here today, gone tomorrow dot-com stocks) driven by rampant corporate fraud (i.e. Enron, General Electric, WorldCom, etc.) that forged their earnings, creating an economic mirage.
Now, setting aside all biases, consider some of the other bull market indicators:
- Unemployment has hovered around or below 5% for months now (statistically speaking, economists consider 5% to be essentially full employment),
- Home ownership is at an all-time high,
- Taxes remain low, and yet tax revenues are at record levels,
- Interest rates are still around historic lows,
- Inflation is low and in check,
- GDP and consumer confidence are strong,
- Income and profits are up, and the list goes on…
No matter which way it's sliced, the economy is alive and bitchin’.
All this good news stands impressively enough by itself; however, consider all that has been thrown at U.S. economy over the past six years:
- A recession that began in mid-2000,
- Rapid globalization, including rising competitors like India and China,
- The September 11 terrorist attacks (most estimates place the total economic losses of 9/11 at somewhere around $2 trillion, not to mention the cost of the ensuing counterterrorism efforts in Afghanistan and Iraq),
- Hurricane Katrina, the most expensive natural disaster in American history.
With regards to the upcoming midterm elections, historically speaking, a strong economy favors the incumbent party. Add it up to vote for whomever, but know the facts.
It's the greatest tale never told, and it's high time people start talking about it.
Commentary by Alex J. Fletcher