Dow 17k

By Isaac Cohen*

The initials DOW 17K signify the Dow Jones Industrial Average, last week, broke through the 17,000 point barrier, pushed by the news of 288,000 new jobs created in June.

The Dow Jones Industrial Average measures the stock price performance of 30 so called “blue chip” companies. The Dow started the current ascending cycle in the middle of the Great Recession. After 64 months, it already is the fourth longest ascent, since the Great Depression of 1929. Also, since it reached 16,000 points in November 2013, the current is the seventh fastest 1,000 point gain in the Dow’s history.

There is consensus the main propeller of stock market performance are interest rates close to zero and also low bond yields. By contrast to other investments, stock market performance has been spectacular. For instance, thus far this year the Dow is up 14 percent, which indicates it could reach 30 percent by the end of the year, as it did last year.

These spectacular gains in the stock market are fueling the current debate on social inequality, because salaries are stagnant. From a year earlier, salary increases reached only 2 percent, the same as the last four years and barely above the inflation rate. Also, at an average in June of $20.58 an hour, salaries are well below productivity growth.

*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.

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