The Washington PostDemocracy Dies in Darkness

The Dow is hitting a record high. No, for real this time.

The business media has a habit of trumpeting every new round number hit by the Dow as a record. Thankfully, that didn’t happen as much Monday, when the Dow crossed 16,000 for the first time. Everyone seems to have gotten the memo that these milestones are meaningless when adjusted for inflation.

But it turns out the headline writers should be on the lookout: The Dow is approaching its actual inflation-adjusted closing record. I asked William J. Hausman, a professor of economics at the College of William and Mary, to crunch the numbers. Hausman says he was glad to do it; the media reporting index figures without adjusting for inflation is one of his pet peeves.

Here’s what he came up with: Adjusting the figures using the consumer price index for all urban consumers (or the CPI-U) from September, the all-time closing high for the Dow Jones Industrial Average was set Jan.14, 2000, at 16,261.40. On Tuesday morning, the Dow crossed 16,000 yet again, meaning we’re getting close.

You’ll sometimes see stories erroneously citing 2007 as the Dow’s previous all-time high— another moment of market exuberance right before a crash. When you adjust the 2007 figures for inflation, it turns out the height of the current Dow surpasses the 2007 peak of 15,708.6, too.

As for the Standard & Poor's 500, which also keeps rising this year, Hausman says the real closing high was on Jan. 14, 1999, at 2,093.78. The S&P approached 1,800 Tuesday morning, and Hausman says the index has already crossed its December 2007 high.

Why does any of this matter? It means that put in the proper context, the stock market is approaching heights not seen since the loftiest days of the infamous tech bubble. In other words, we are past the point of making up the difference lost during the financial crisis. The only peak left to scale dates from the heady days of 1999 and 2000.

Whether you think that means stocks are approaching bubble-territory right now is another matter. Either way, it’s striking how far the markets have roared back while the nation's unemployment situation is still comparatively dismal.

And, unfortunately, you can’t argue that Americans are broadly benefiting from the stock market’s rise. A Gallup poll this year showed that only 52 percent of Americans have money invested in the stock market either personally or jointly with a spouse. That number is way down from 60 percent in 1999, when the stock market was at its true all-time high. This suggests that many households were so clobbered by the financial crisis that they have completely missed out on the stock market’s performance, the rare part of the recovery that’s looking better every day.