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Finding meaning in the S&P 500 2000 mark

Monday, August 25, 2014 - 02:35

The major Wall Street indexes are hitting new highs and benchmarks, thanks in large part to accommodative Federal Reserve policy and investors search for higher returns. Bobbi Rebell reports.

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When the S&P 500 broke through 2000 for the first time on Monday, it marked a six-year rally that has been a boon to many Americans. The key driver? The Fed, says Reuters markets editor David Gaffen: SOUNDBITE: DAVID GAFFEN, MARKETS EDITOR, REUTERS (ENGLISH) SAYING: "There is no doubt that we had a big, big help from the Federal Reserve which of course after the financial crisis cut rates to zero and started to aggressively buy Treasury bonds to keep rates at very low rates and so you had that impetus that kind of added something really big. You know, people were basically being forced to go find yield elsewhere to take on more risk which is what the Fed wanted." The S&P 500 index has risen 195 percent from its closing low in 2009, a six-year rally. The Dow is up 161 percent in that time period. Meanwhile the Nasdaq, which recently hit 14 year highs- is up 260 percent. The gains in U.S. stocks have been better than other major world stock markets in the past year, and have also beat the safe-havens of gold and bonds. And buying by insiders could extend the march upward. Catalyst fund manager David Miller. SOUNDBITE: DAVID MILLER, PORTFOLIO MANAGER, CATALYST (ENGLISH) SAYING: "When you look at the insider buy/sell ratio, how insiders are buying versus how much insiders are selling, as a whole it's a remarkable indicator for where the economy and the stock market are going in general. And right now, after Yellen made it clear that she really wants to pursue a soft dollar policy, the stock market has seen that insider buying ratio really pickup. So we have a lot more insider buying than what is typical at the moment. So we are pretty bullish." But S&P Capital IQ's Sam Stovall has a warning. SOUNDBITE: SAM STOVALL, CHIEF EQUITY STRATEGIST, S&P CAPITAL IQ (ENGLISH) SAYING: "The market is tired. We have now gone 35 months without a decline of 10 percent of more and the median since World War 2 is 12 months. So we have almost gone three times as long as we normally have without seeing a pullback, that ends up resetting the dials." And as much as low rates helped, rates hikes are a risk: SOUNDBITE: DAVID GAFFEN, MARKETS EDITOR, REUTERS (ENGLISH) SAYING: "If interest rates do finally start to rise, especially long term rates, and if they do rise in a more pronounced fashion to the point where the 10-year note gets to, say, three percent, and then beyond in short order, well then you could see some of that come out of stocks a bit." Not everyone has been coming out ahead. Short sellers have been squeezed. And hedge fund performance has also trailed stock market performance in the last couple of years.

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Finding meaning in the S&P 500 2000 mark

Monday, August 25, 2014 - 02:35