







Q: Adjusted for inflation, where does the Dow stand?




Q: What other factors are involved?



Q: And what have bonds been doing?

A: For the most part, the rally in stocks has been accompanied by a rally in bonds as the Fed has pledged to keep rates low and the stimulus flowing until the U.S. economy is fully recovered. Yields, which move inversely to bond prices, have been edging up recently though, suggesting that the rally may be over.

The yield on the 10-year Treasury note, which rose two basis points Tuesday to 1.90 percent, is lower than the dividend yield of about 2.1 percent on the S&P 500, which measures the ratio of annual dividend payments to stock prices.

Q: Does the stock rally still have legs?

A: That depends on who you talk to. The bulls say that, based on many valuations such as stock prices compared to earnings, many equities are cheap compared to historical averages and are far more attractive investments than bonds, which are trading close to record highs. The bears will tell you that worries about growth in Europe and China still linger and bickering in Washington could still derail the rally. Also, economic growth, while steady, is nothing to get excited about.

“We have a euphoric spirit in the market and that’s always a point of vulnerability,” Byron Wien, vice chairman of Blackstone Group’s advisory services unit, told Bloomberg Television.

“Too much of the money has gone into the stock market. Not enough of it has gone into the real economy. Companies don’t have pricing power. The economy is only growing at 2 percent real, 4 percent nominal, and I think we could see a margin squeeze and some disappointing earnings.”

Q: How much would I have made if I’d gotten in at the bottom?

A: An investor who put $1,000 into the stock market on March 9, 2009, the day Dow bottomed out after the Great Recession, would now have $2,406. That’s a total return of 140.6 percent, including stock gains and dividends.

Q: Why doesn’t the exuberance on Wall Street show up on Main Street?

A: Wages are stagnant and incomes are shrinking. Unemployment is at 7.9 percent. The weak job market is limiting pay. With so many applicants to choose from, employers need not compete for workers by boosting salaries.


Median household incomes fell 4.8 percent between June 2009 and June 2012, after adjusting for inflation, according to a report by Sentier Research, which crunches census and other government data. Meanwhile, Americans are paying down debt. That leaves fewer dollars available for spending. And despite recent gains, hiring remains slow.

Q: What about global stocks?

A: Global equities also rose Tuesday as China pledged to support economic expansion with a 10 percent jump in fiscal spending. Many markets in Europe and Asia were trading at multiyear highs, too, in part because of Wall Street’s rally.

U-T writer Roger Showley, Bloomberg News & TheStreet contributed to this report.