Friday, August 17, 2007

USA Today Gives Doom and Gloom Outlook On Stocks

The headline for USA Today's paper on Thursday read "STOCKS GIVE BACK 2007 GAINS - DOW BELOW 13,000" and the print article showed a graphic of the S&P 500's line graph for the 2007 year.

It all sounds so terrible doesn't it? I guess we need to bail out of the stock market! Pull your money out now before it's all gone!

Not so fast.

Let's look deeper into the topic of this knee jerk reaction from USA Today. Let's look at the 52 Week range of all 3 major indices. Dow Jones Industrial Average, NASDAQ, and S&P 500.

Dow Jones:
August 16th Open - 12,861.47
August 16th Close - 12,845.78
52 Week Low - 11,218.70
Difference - +1,6227.08 (+14%)

August 16th Open - 2,458.83
August 16th Close - 2,451.07
52 Week Low - 2,122.65
Difference - +328.42 (+15.5%)

S&P 500:
August 16th Open - 1,406.70
August 16th Close - 1,411.27
52 Week Low - 1,289.82
Difference - +121.45 (+9.3%)

Each major index has still beaten the inflation rate even after this bit of a drop. And now since the Fed has dropped the discount rate, the markets have reacted with a massive buying spree. Currently all 3 indices are up over 1% for the day.

If you care to look at the increase over the past 5 years, the graphs are DJI, NASDAQ, and S&P 500.

And 10 years ago, Dow Jones just broke 8,000, NASDAQ was at 1550, and was beginning the "dot-com boom," and the S&P was at a mere 900.

But you're right USA Today...we have it so much worse than 10 years ago, 5 years ago, or even last year. Don't let the media play you for a fool just because the market hits a bump in the road. If you can tell by the charts, it's nothing but bumps.