Dow Above 17,000
July 17, 2014
By Marc Fogarty, CPA, CFE
Even though the economy shrank in the first quarter, the stock market continued to rise. This seems contradictory, until we take a look at some of the facts.
For the first time, the Dow broke the 17,000 mark shortly after a better-than-expected jobs report indicated that the economy might be picking up. If you look at the stats from the period after the financial crisis of 2009, the market has been consistently bullish with a slow and steady rise. As reported by the S&P Dow Jones Indices, it’s the fourth longest bull market since the 1929 market crash.
Interest appears to be running high, with investors betting on continued advances in the technology and life sciences sectors. Most of the recent IPOs in those sectors have been considered successful. Even slightly older public technology companies like Netflix and Facebook are continuing to generate interest and revenue in the market. For example, in the last twelve months, Facebook stock rose approximately 170% and Netflix approximately 114%.
So how long will it last? Before the technology bubble in 2000, there had been a rapidly growing economy. What makes this current market unusual is that, while the overall economy might seem sluggish, the equities markets are making a steady climb. Some believe that the stability of the stock market will make for a stronger economic recovery overall.
No one knows how long the current bull market will last; but for right now, tech IPOs are on the rise and many companies are contemplating entering the market. Even if the overall economy isn’t doing well, now might be a great opportunity to raise capital with an IPO.