The most widely followed barometer of the United States stock market rose above its 2007 peak to hit a high on Thursday, while most of the rest of the world could only look on in envy.
The nominal record set by the Standard Poor’s 500-stock index is the latest sign that the American economy is recovering some of the strength it had before the financial collapse of 2008, partly helped by stimulus from the Federal Reserve.
It has been a little more than three weeks since the Dow Jones industrial average hit a milestone high, also set in October 2007, but the S. P. is considered more representative of the breadth of American stocks.
The S. P. reached its new nominal high after several days of flirting with the record as investors struggled with the turmoil caused by Cyprus’s banking crisis. The milestone capped a strong first quarter, in which the index rose 10 percent to hit the high.
Meanwhile, stock markets in nearly every other large economy around the world are still well below their records. An index of the entire world’s stock market, without the United States, is still down about 29 percent from the level it hit in 2007, according to an analysis by Ned Davis Research. Only some smaller nations, such as Denmark, Mexico and Colombia, have fully recovered their losses.
Workers in the United States have learned that the stock market’s performance is not always a good gauge of the underlying economy’s strength. Unemployment in the United States has remained stubbornly high at the same time that share prices have risen since bottoming out in March 2009. Even with the record level, the S. P. 500 is still not back to its 2007 level when inflation is taken into account.
Still, the performance of the American stock market would have seemed improbable during the depths of the crisis, given that it was financial markets in the United States that led the global economy into recession. Strategists and economists have said that the divergence since then is largely a result of the relative speed with which the United States government and corporate sector responded to the causes of the 2008 crisis.
“The U.S. addressed the problems of the financial crisis faster and with much more ferocity than the rest of the world,” said Edward M. Clissold, a market strategist at Ned Davis Research.
The S. P. 500 finished Thursday up 0.4 percent, or 6.34 points, at 1,569.19. The Dow Jones industrial average climbed 0.4 percent, or 52.38 points, to 14,578.54. That is 11 percent above its level at the beginning of the quarter.
The Nasdaq composite index rose 0.3 percent, or 11 points to 3,267.52, far below the heights it reached during the dot-com boom in 2000.
Economists have given much of the credit for the market’s recovery to the Fed, which worked quickly with the rest of the federal government to bail out and revamp the nation’s banks and financial system, which the European Central Bank started doing in earnest only last year. While bank bailouts remain contentious, they have allowed the institutions to resume lending.
The Fed also acted on its own to pump money into the economy with bond-buying programs known as quantitative easing. Many central bankers around the world worried that those programs would result in extreme inflation. There are also fears that the American economy will not be able to remain on its current trajectory once the Fed draws back. But all that has not stopped other countries from beginning to copy the Fed’s lead.
“The Fed has won the battle, and continues to win the battle,” said Jack Malvey, the chief global markets strategist at BNY Mellon.
In Japan, the government of Prime Minister Shinzo Abe was elected last December after promising a more aggressive approach to monetary policy. Japan’s Nikkei index has been the best performer of any of the world’s large stock markets in the first quarter of this year, rising 19 percent. That still leaves the Nikkei almost 68 percent below the heights it scaled in 1989 before Japan’s real estate market soured.
Article source: http://www.nytimes.com/2013/03/29/business/daily-stock-market-activity.html?partner=rss&emc=rss