Yesterday, the Dow Jones Index closed at an all time high of 14,253.77 recovering from its recession low of 6,443.
There is no denying the creator of this bull market is Ben Bernanke. His policies have kept short-term interest rates near zero and the 10 year treasury note under 2%. Before the market collapsed the 10 year note was around 4%. With the Fed continuing to spend $85 billion a month to purchase mortgage and treasury back securities, these interest rates will remain at these levels for the forseeable future.
While the new high makes for great headlines, when you look deeper there are troubling facts about this new level. The first being, when discounting for inflation, the stock market is below its 2000 level.
The second is this is not a deep rally. When looking at the components of the DOW, five stocks account for 30% of the gains and 10 stocks account for 55% of the gains. Here is the break down:
|Company||Tues. close||Contribution to Dow gain|
|Walt Disney Co.||$56.38||4.06%|
|Procter & Gamble||$77.09||3.28%|
|Johnson & Johnson||$77.55||3.08%|
|Bank of America||$11.57||0.78%|
Finally, this has been a low-volume bull market. What does that mean? It means that for the most part, only the professionals have been participating in the market recovery. The average person has not been able to partake and the reason for that is very obvious.