REAL Reason the Dow Jones is Rocketing

The Dow Jones Industrial Average has finally crossed its previous record closing high of 11,722.98, reached on January 14, 2000. In May, the index came within a hundred points of its previous high point. However, concerns about inflation and rising oil prices drove it back down at that time. Since then, the Dow was flirting with the old record.

Some will complain, because of the way it is constituted, the Dow fails to give a true reflection of investors’ sentiments. They will say that the S&P 500,which perhaps provides a better measure, is only at a five-and-a-half year high. And though the Dow is surging, one might reasonably ask what traders are so happy about.

The Dow is a powerful symbol in a country that seems worried about the recession. GDP growth rate was just 2.6% in the second quarter. Though it is a healthy rate by European standards, but still dull compared with America’s recent record. Consumer confidence, which peaked in April, has since fallen back. Orders for durable goods unexpectedly fell for the second month in August. The unsettled state of the housing market is more worrying. Analysts see the long boom finally coming to an end. US now seems to be paying out significantly more to foreign creditors than what it is getting from foreign investments.

However, not all the news from economy is bad. Oil prices have fallen considerably. Lower prices should benefit America’s soaring current account deficit. Fears of inflation are also lessening. The credit goes to a steady increase in interest rates by the Federal Reserve. The stock market is also enjoying. Economic news from abroad is also rosy. Japan is getting up some speed and European markets are also looking brighter. Forecasters are expecting the productivity growth to stay strong for some time, which will increase the pace of growth without triggering inflation.