The dramatic drop in the Dow Jones average index in 2008-2009 was a direct reflection of the struggling economy. The stock market indicator fell to 6,547, the low point of a seven-year span. Investors lost confidence in the economy, and many moved capitol out of the stock market, in fear of losing too much of their net worth. We are happy to report that the Dow Jones average and the US economy are making a comeback. The index made it back over 10,000 points thanks to renewed investor confidence since March of last year, returning it to the value that investors enjoyed back in October, 2008. Does this mark the end of trouble for our economy? The future is still a bit uncertain, but the positive performance of the Dow Jones average sure has economic experts in a fervor!
What Does the Rising Index Mean?
The recent rise in the Dow Jones average is an indicator that the US economy is starting to recover from the recession. As investors find a renewed confidence in the stock market, more money will go into the system to help fuel its recovery. This is only an initial step towards economic revival. Nationwide unemployment rates still hover around 9.5%, and homes continue to go through foreclosure as families and businesses file for bankruptcy. With this being the case, the average American doesn’t take much comfort in the rising Dow Jones average; instead, it is a diagnostic that only investors and economic analysts can appreciate at this point.
Will the Dow Jones Average Continue to Rise?
We’ve already seen earning reports from Intel and JP Morgan Chase indicating that they are turning a profit and helping to boost the Dow Jones average. However, the strong performance from just a few companies may not be enough to keep the index rising. The original dive that the Dow took was largely due to the instability of banks that had overextended themselves with poor mortgage loans. This means that the third-quarter earning from banks like Citigroup Inc and Bank of America will be what makes or breaks the Dow Jones average in the near future. Experts are focusing on earning reports from the financial sector, but it is still to early to make any predictions.
Future Prognosis for the US Economy
Remember that the recovery of the Dow Jones average is only an indication that the economy is beginning to heal – it doesn’t mean that our country won’t continue to face economic obstacles. The index is still 29% below its high point from October 2007, and retail sales are still below average. While various stimulus programs are helping to boost sales, some experts believe that the current unemployment rates and weak real estate market are the biggest threats to the US economy.
Experts are buzzing about the rising Dow in the hopes that this positive turn will incite more confidence in the US economy on the large scale. The truth however, is that individuals are going to have to wait another year or so before the benefits trickle down to them in the form of jobs, reduced credit card debt, and low interest home loans.