This report carried in the Washington Business Journal typified yesterday's coverage of yet another decline in the stock market:
Dow declines further still
Wall Street’s major stock indexes followed Monday’s strong sell-off with a day of fluctuation, ending with more losses.
The Dow Jones Industrials Average gyrated between modest gains and losses throughout the trading day, ending the down 37 points, or 0.55 percent, to close at 6,726. Monday’s fall below 7,000 sent the Dow to its lowest level since April 1997.
The Standard & Poor’s 500 Index ended Tuesday trading down 4.49 to 696, it first close below the 700 level since October 1996. The Nasdaq Composite Index ended Tuesday’s session down 1.84 to 1321.
But after considering inflation, the markets are, in real terms, stuck at 1995 values, as shown in the following chart:
The gray areas show how the indices compare to prior year-end values. In nominal terms, the Dow and the NASDAQ are back to levels achieved during 1997, while the S&P 500 has already fallen back to where it was (as indicated above) in October 1996.
But in real terms, all three indices are back at levels achieved during 1995. The S&P 500 isn't that far from falling back into 1994 (yesterday's close of 696 vs. 12/31/1994 close of 650).
That is significant. 1995 was the beginning of the markets' remarkable bull run, which was fueled primarily by the Gingrich Congress's (relative) spending restraint, followed by the GOP-inspired welfare reform (which then pushed a half-million additional workers into employment per year from 1997-2000), followed by the 1997 capital-gains tax cut (which Treasury Secretary Bob Rubin, now nicknamed Bailout Bob, resisted).
The inflation adjustments reveal that the Obama Economy has taken us to a point where nearly all of the gains in value achieved from 1995-2007 have been virtually wiped out.
This narrative may explain why there's not a lot of evidence that the press is interested in getting real, so to speak, when comparing historical stock values.
Cross-posted at BizzyBlog.com.