In the days building up to the fiscal cliff at the end of last year, the markets were sanguine. But when a compromise was reached on New Year’s Day, the Dow surged more than 308 points, or 2.35 percent. The Standard & Poor’s 500-stck index jumped 36.25 points, or 2.54 percent.
More importantly, stock prices have been boosted by the Federal Reserve’s massive stimulus program, which has pushed down long- and short-term interest rates. The low rates have encouraged investors to seek out higher returns in the stock market.
“The market has the Fed behind its back,” Chang said. “Everyone is still looking for that yield. . . . That’s why the Fed strategy is working.”
Fed Vice Chair Janet Yellen signaled Monday that the Fed would be continuing its $85 billion monthly bond-buying program.
On Tuesday, Cisco, United Technologies and Boeing led the way among the Dow 30 with the biggest stock price gains; all three rose more than 2 percent.
Another oft-cited benchmark for the market, the S&P 500, is also approaching its record. The S&P jumped 14.59 points, or roughly 1 percent, to 1539.79 on Tuesday, about 2 percent shy of its intraday record of 1576.09. Like the Dow’s, that high was also set Oct. 11, 2007.
The Dow’s previous intraday-trading nominal high was 14,198.10; the closing record was 14,164.53. Adjusted for inflation, the Dow is still about 10 percent off the 2007 high.
Nevertheless, the market has shown a remarkable turnaround since the crisis, at least compared with other measures, such as the country’s economic growth and joblessness figures.
People eyeing their retirement portfolios may be cheering the market’s return to pre-recession levels. But how much longer can the good times last?
Ed Easterling, founder and president of investment firm Crestmont Holdings, said stocks are at a point that is “about as good as they can get, absent a bubble.”
“It’s time to be careful,” he said.
That said, there is history pointing to a likely bull market this year, according to a note by Sam Stovall, chief equity strategist for S&P Capital IQ. Of the 26 times since 1945 that the S&P rose in price in both January and February, the index, including dividends, has been positive for the calendar year every time.
Ylan Q. Mui contributed to this report.