Four years and 7,800 points ago, the Dow Jones Industrials were on the run and looking for cover. An 18-month pummeling had just cut the index in half, returning prices to where they were in 1997 — a 12-year low. Fast forward to the present, and we are wiping the champagne from our eyes and toasting an all-time high for the very same index.
It would be understandable to look at the quadrennial doubling that has just occurred for this 30-stock benchmark and express a little concern. After all, according the Stock Traders Almanac, this bull market is already twice as long (1,457 days old vs. 755) as the average bull market of the past century and has delivered about 50% more upside punch (+120% vs. +86% avg.) than usual.
What troubles me, however, is the more recent history and the fact that the Dow has popped 15% since mid-November at a time of slumping profits, lackluster growth, global strife and political ineptitude.
As my co-host Jeff Macke and colleague Mike Santoli discuss in the attached video, calls for a pullback and an actual pullback are distinctly different things.
"You have to have the memory of a house fly to think this is a bubble right now," Macke asserts. "We've seen bubbles. This is not a bubble."
From Santoli's perspective, compared to 2007 the Dow is "pretty much right in the range, in terms of the valuations," although there's no comparison when it comes to the economy then versus now.
And that is exactly why traders say Tuesday's celebration of the record high was somewhat muted. The short-term risk picture becomes even more pronounced when you add in the fact that the S&P is lagging the Dow, risk appetite is fickle at best, and investors have been rotating into defensive sectors for several weeks before the big event.