Goldilocks Appears for a Bull Market Anniversary

What better way to celebrate the ninth anniversary of the bull market than with a strong employment report?  The economy created a better than expected 313,000 new jobs in February, higher than the anticipated 200,000. The strength was seen across a variety of sectors: retail increased by 50,300, construction was up 61,000, manufacturing added 31,000 jobs and professional & business services employment added 50,000.

Also, the previous two months were revised higher, making the three-month average 242,000, an uptick from last year’s monthly gain of 175,000. The unemployment rate remained at a 17-year low of 4.1 percent for the fifth consecutive month and wages, the source of great anxiety last month after jumping by 2.9 percent, moderated to an annual pace of 2.6 percent.

The good news on job creation, couple with wages rising, but not too fast, meant that Goldilocks made an appearance to mark the second longest bull market on record with a nice rally. (To eclipse the bull that ran from Dec 1987 to March 2000, this one would need to make it past June, 2021, without a 20 percent decline from a closing high.)

In case you blocked it out, nine years ago Friday, here’s where the major US stock indexes stood:

• DJIA: 6547 (lowest since 4/15/97)
• S&P 500: 676 (lowest since 9/12/96)
• NASDAQ Composite: 1268 (lowest since 10/9/02)

Since that fateful day, stocks have charged higher, though not without a few hiccups. Who could forget the 2011 swoon after S&P downgraded the nation’s credit rating…Or the fears of Grexit and the dissolution of the Eurozone…Or the first time that then-Fed Chairman Ben Bernanke spoke about tapering the central bank’s bond purchases? While there have been some close calls, the bull remains intact. Over the past nine years, the broad S&P 500 has more than quadrupled, the Dow is up 287 percent and the NASDAQ has zoomed more than 496 percent higher.

What could upend the rosy scenario? Sometimes bulls die of sheer exhaustion…or by aggressive Fed action…or by an unexpected exogenous event, say like a trade tiff.  For now, the big gains have helped propel the net worth of the more than half of Americans who own stocks or stock mutual funds. The booming stock market, along with a jump in real estate values, pushed total household net worth to a record $98.746 trillion, though the figures are not adjusted for inflation or population growth, according to the Fed.

Overall U.S. wealth has grown steadily since the recession ended nearly nine years ago, but the division between rich and everyone else remains apparent. Edward Wolff, an economist at New York University, calculates that in 2016, median wealth (the point where half of households are richer, and half poorer) was still 34 percent below its pre-recession level. Perhaps that fact, along with our short memories explains why the savings rate was 3.74% for 2017, down from 5.98% a year earlier and 7.19% in 2015.