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How About Let's Get Some Perspective on the Stock Market Rally?


Are you growing sick and tired of everybody going ga-ga over the ~180% gain in the US stock market over the last five years? I sure am.

The S&P500 US stock index closed at its (last) low of 677 on March 9, 2009. On March 7, 2014, it hit its highest close to date of 1878. That's a whopping 177% increase! (excluding any dividends paid along the way)

Very impressive, right? 

It certainly is, though let's not forget that financial markets are artificially supported right now, temporarily propped-up by the extreme financial measures of global governments and central banks. And as with many things, there's a context and perspective to the story that isn't getting told.

Prior to the recent "Great Recession," the S&P500 closed at its previous high of 1565 on October 9, 2007. So how much has the stock market actually gained since that time? Try about 20% (excluding dividends). 

Not such a big deal after all, is it.

Most investors who've ridden this bull market up over the past five years first rode the bear market down between 2007 and 2009. Those who kept making regular investments through the down times--such as payroll contributions to a 401(k) plan--have certainly benefited to this point, because they "bought low." On the other hand, many folks got the double-whammy of panicking and selling after the decline and then staying out on the uptrend. Of course, nobody precisely and consistently times the markets. 

Anyway, my point is let's be diligent to always put these kinds of situations into proper context and not get caught up in the hype. The phenomenal five-year run in stocks is not quite what it's cracked up to be.