Dow Jones Pushes Frontiers

The Dow Jones Industrial average has broken through its previous record level to reach a new frontier and uncharted territory. The Dow hit a record high of 14256 points which broke its record close of 14164 which was seen in October 2007 before the global financial crisis struck.

The news of the Dow’s rally has triggered rises on global markets. London’s FTSE 100 index closed at 6432, a level it last experienced back in January 2008. In Asia, Japan’s Nikkei index closed 1.1% higher; the index has been enjoying a bullish period since the election of Shinzo Abe’s government which is promising an end to deflation and further moves to kick-start the economy. Stock markets also closed higher in Hong Kong, Shanghai and Singapore. In Australia, the stock market was up by 0.9%; both Australian and Japanese exchanges are now at levels last seen in September 2008.

The Dow has returned to record territory, but as a mark of the intensity of the global financial crisis, it needs to be recalled that the index fell to a low of 6547 points in March of 2009 – investors picking their stocks correctly and entering the market in 2009 will have made a killing. Looking at things slightly differently, it can be seen only too clearly that the global financial crisis has cut out five years of growth from the global economy. Whilst the economic cycle has peaks and troughs, this crisis has been marked by the most sustained downturn since the Great Depression of the 1930s.

The global recovery is still sluggish and faces “strong headwinds” as current, trendy language would put it. The influence of the “Sequester” as the series of mandatory US spending cuts has been christened, has yet to be felt. Unemployment is still uncomfortably high in much of the developed word. The influence of last week’s indecisive Italian election on the progress of the Eurozone’s third largest economy has yet to be determined and most of the world’s major economies are mired in very substantial debts – but hey, let’s enjoy the moment!