Magic Numbers

Now that October has passed without a major panic, investors can focus on magic numbers. Living in a decimal-oriented society, we make a big deal out of turning 30 or 60 and celebrating the year 2000. In the late Nineties, the Dow Jones 30 Stock Index went above 10,000 for the first time. That was a big deal.

Three years later it plunged below that level when the dot-com bubble burst. The Dow rose to 13,000, then nose-dived after the "Oh, By the Way, We Need $700 Billion Dollars" day last October. It hit bottom at 6,666 in March, but has risen by 50% since then.

Though the Dow is not a particularly good proxy for the overall stock market, it is what leads business reporting in the mainstream media, so it's psychologically important. The stock market is considered to be a leading economic indicator. A rising market often foreshadows the end of a recession. Unemployment, however, at a 26-year high, is a lagging economic indicator. When the number of unemployed people begins to drop it usually means that the recession has already ended.

It's nice that the stock market is happy, but major economic threats remain. At least things are heading in the right direction for now.