Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Psst -- the Dow Is Still 8% Below Its 2007 High

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

We finally got there! Stocks put up solid gains today, as the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) added 1% and 0.9%, respectively. That was enough to put the Dow past its previous all-time closing high of 14,164.53, which it achieved on Oct. 9, 2012 -- in nominal terms, anyway.

The S&P 500 is now within 2% of its all-time high, which it achieved on the same day. Incidentally, if you're wondering about small-cap stocks, they surpassed their 2007 high back in April 2011 -- the Russell 2000 Index now sits 8.4% above its July 2007 high.

The VIX (VOLATILITYINDICES: ^VIX  ) , Wall Street's fear gauge, fell nearly 4% to close below 13.5. Few investors want to protect themselves against declines when the market is making new highs -- little wonder the VIX is back at rock-bottom levels. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)

Don't forget the inflation gremlins
Financial journalists typically report growth and returns on a nominal basis (i.e., before inflation is accounted for), except where someone does the work for them, such as when the Bureau of Economic Analysis releases GDP growth figures, which are reported on a real, inflation-adjusted basis. This is a grave disservice to investors and consumers! Inflation has a very real, and definite, cost.

The media is trumpeting from the rooftops today's new all-time nominal high for the Dow, but look at what happens when inflation meddles with returns:


Dow Jones Industrial Index (Nominal)

Dow Jones Industrial Index (Inflation-Adjusted)*

Oct. 9, 2007



March 5, 2013



% Gain (Loss)



*Re-based to October 2007. Source: Author's calculations, based on data from Yahoo! Finance and the Bureau of Labor Statistics.

In real terms, we're still 8% below the October 2007 high. For the Dow to achieve a new inflation-adjusted high today would have required a closing price of roughly 15,480. Inflation is a reality in the world we live in; you need to invest as such. Make sure you're looking at the right numbers.

The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (9) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 05, 2013, at 10:51 PM, awallejr wrote:

    Did you factor in reinvested dividends?

  • Report this Comment On March 06, 2013, at 8:27 AM, TMFAleph1 wrote:

    No. The total return is also worth tracking, but it is separate question from that of the index level.

  • Report this Comment On March 06, 2013, at 8:44 AM, awallejr wrote:

    Except you compared a static number, the October 9, 2007 number with one five years older only factoring in the negative (inflation) yet ignoring the positive (dividend reinvestment). The total return should be the only number worth talking about.

  • Report this Comment On March 06, 2013, at 10:31 AM, TMFAleph1 wrote:

    Both are worth talking about. Consider investors who live on their stock dividends. Dividends are thus income and index level represents wealth. Considering wealth level alone is useful.

  • Report this Comment On March 06, 2013, at 11:13 AM, TMFAleph1 wrote:

    Stay tuned, as I will be putting up a separate article with some graphs to highlight the total return.

  • Report this Comment On March 06, 2013, at 5:30 PM, awallejr wrote:

    K I would find that interesting to see.

  • Report this Comment On March 06, 2013, at 8:58 PM, DrGoldin wrote:

    I do think the author's point is still valid. The DJIA is a pretty arbitrary indicator anyway. It's not as though the world will be qualititatively different now that we've passed the nominal high. Mostly it's just a psychological benchmark: "We're back to even!"

  • Report this Comment On March 06, 2013, at 9:02 PM, XMFBiggles wrote:

    The nominal total return, with dividends, from the Dow's 2007 high to yesterday's close is 17%:

    Just a few numbers I pulled together for both sides of the argument.

    - Alex (the other one)

  • Report this Comment On March 06, 2013, at 9:43 PM, awallejr wrote:

    Thanks for that calculation. It does show the value of the dividend.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2295181, ~/Articles/ArticleHandler.aspx, 9/30/2016 12:58:48 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,326.47 183.02 1.01%
S&P 500 2,170.21 19.08 0.89%
NASD 5,315.59 46.43 0.88%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 12:43 PM
^DJI $18326.95 Up +183.50 +1.01%
^GSPC $2170.12 Up +18.99 +0.88%
S&P 500 INDEX CAPS Rating: No stars
^VIX $12.76 Down -1.26 -8.99%
Volatility S&P 500 CAPS Rating: No stars