Stock Market Reaches 12,000

Earlier this week, the Dow Jones Industrial Average crossed the 12,000 level for the first time since June 19, 2008. While this is a great achievement, we should heed what President Obama stated last night during the State of the Union address:

Two years after the worst recession most of us have ever known, the stock market has come roaring back … but we have never measured progress by these yardsticks alone.

He is correct. The 12,000 mark is more psychological than a firm indication of the direction of our economy. We have seen the market swing wildly at times over the past three years, and there is no way of knowing if that trend has come to a close for the time being. After all, we could easily slip back to the 11,000 mark if concerns about the housing market and international pressures cited by economists come true. However, that doesn’t mean investors don’t have hope in the future of our economy.

I remember watching the US automakers stock sliding a few years back, hitting their lowest point when they started approaching Congress in search for support. Ford slid all the way down to the one-dollar range, with investors and the general public alike wondering if they would take a bailout package by the Government. Choosing to stick with working within the market itself, they were able to shed a lot of overhead and narrow their product lines, and are currently trading at $18+/share. Imagine if you had invested back then…

For the past two decades, I’ve purchased stocks either through my various company plans or directly through a broker, though I never tried to buy stocks online. I always thought that online stock investing took away some of the safeguards that a broker provided, but I’m wondering if it is something to try if the market continues to reflect some sort of stability. Many of the larger online trading sites provide investment suggestions similar to what a broker provides, but without the large fees that brokers charge. This is something I’ll have to think about the next time the next “Ford opportunity” rolls around.

In the mean time, we have to remember that a growing stock market doesn’t necessarily means the economy as a whole is improving. Home foreclosures and unemployment rates are both still high, while wages continue to lag from where they use to be. Fortunately, reports show that people are saving more money while decreasing their debt which means that maybe the population as a whole has learned an important lesson about personal finance – making sure to live within your means while putting something away as a safety net in case times get bad.