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US stock markets booming, it's no bubble

Thursday, January 24 09:58:23

Tuesday was a typical day in this long rally, which has proceeded with only a few interruptions since March 2009. The Standard and Poor's index rose 0.4 percent, enough to make Americans' 401k accounts a little bit more flush, but not dramatically enough to prompt any outpouring of celebratory confetti or even a hint of the bubble-era mentality that flourished in the late 1990s But add up those days of 0.4 percent gains-there have been a lot of them in the last four years-and it is a remarkable run. Tuesday's close left the S&P only 4.6 percent below its all-time high in October 2007, meaning it could enter record territory after just a couple more good days. We are living through the strongest stock market rally since the late 1990s-though this one has far, far more solid fundamentals underlying it.

The rise is a major, major reason that Americans' household finances are looking better. Stock investments and mutual funds only amount to about 20 percent of Americans' assets, according to data from the Federal Reserve; much more of their money is tied up in their houses, other physical assets like cars, bank accounts, life insurance policies, and the like. Yet between 2008 and the third quarter of 2012, they accounted for 59 percent of the $10.6 trillion rise in American households' assets. Americans-at least those with significant savings-are feeling wealthier, and the booming market is a big part of the reason. Household real estate, by contrast, is still worth less than it was in 2008 even after edging up recently.