The Dow Jones Industrials just closed above 17,000 for the first time ever. While they are celebrating the 4th of July, Americans can rejoice in the good fortune the stock market is giving them.
But wait, what’s actually driving the stock market to reach its highest level of all time?
Since its high in 2000, the Dow is up 45%. Over the same period the CPI is up 40%. Nearly all of the gain in the stock market is just because of prices going up, not because of real economic growth. In fact, if you factored inflation out of your stock returns over the past 14 years, you earned a miserly 0.2% per year.
There’s lots to celebrate this 4th of July weekend, but stocks for the long run is not one of them.
(Originally posted at Mises Canada.)