Dow nears 17,000, but most people missed the ride

Still poor as the market hits record highs? You're not alone.

By MSN Money Partner Jun 11, 2014 2:26PM
Image: Broken-Pencil © Christian Zachariasen/JupiterimagesBy Charles Passy, MarketWatch

The Dow Jones Industrial Average ($INDU) is close to passing the 17,000 mark. But is that really reason to celebrate?

The sentiment on Wall Street may be that our long national fiscal nightmare is finally over, but the stock market is just one barometer of prosperity, many economists and consumer experts argue. 

And the problems that have plagued the U.S. in recent years -- declining household income, surging prices for many key goods and services, low interest rates for savings -- remain very much in place, they say.

Add to that the fact that many investors started losing faith in recent years -- and went to cash at the very time the market began its bullish run in 2009 -- and an equally scary reality emerges: Market milestones may not reflect what many Americans are seeing in their monthly portfolio statements.

The bottom line: We’re still suffering a crisis in confidence -- literally. The Consumer Confidence Index, which translates consumer views on the economy into a numerical formula, remains well off its historic highs. Today, the index stands at 83. By contrast, during the peak of the dot-com boom in 2000, the index registered as high as 144.7.

The news is not all bad, of course. The unemployment rate, currently at 6.3 percent, is well below its past-decade high of 10 percent in October 2009. And while consumer prices have climbed since October 2007, they have done so at a fairly modest clip. In the past year, for example, prices have increased by 2 percent, according to the Bureau of Labor Statistics.

Plus, many savers have seen respectable increases in their retirement portfolios over the past five years. Vanguard, for example, reports that the average 401k account balance rose from $56,000 in 2008 to $102,000 in 2013. 

And even factoring in contributions, Vanguard research analyst Jean Young reports that one study of 401k participants, conducted by the firm, showed an average annual return rate of 12.7 percent over the same five-year period. Granted, such a yield is nothing to write home about -- by comparison, the Dow was up at least 20 percent in five of the 10 years during the '90s -- but Young adds that it's a solid figure given the low inflation over the period.

Still, many financial experts say that there's a reason why the good news doesn't quite register in the minds of consumers and investors. Call it the Great Disconnect that has followed in the wake of the Great Recession. And it’s a story that experts say can be told in one sobering statistic after another.

Begin with income. On the one hand, wages have basically kept pace with inflation in recent years. But on the other, unemployment and underemployment have affected overall household income to the point that there’s been about a 6 percent dip since March 2009 to the current median figure of $52,959 (after adjusting for inflation), according to Sentier Research, which tracks income. "It's not a pretty picture," says Sentier principal John Coder.

And what about expenses? While the Bureau of Labor Statistics may say prices are in check, some consumer watchdogs say what applies to overall prices may not apply to some key expense categories.

Consider the cost of fuel: A gallon of gas went from $2.40 in 2009 to $3.57 in 2013, according to the U.S. Energy Information Administration. Or medical care: The employee's share of annual premiums for family coverage has increased from $2,412 in 2003 to $4,565 in 2013, according to the Kaiser Family Foundation. Or even a pound of bacon: In just the past year, the price in U.S. cities has increased by 16.4 percent to $5.69, according to the Bureau of Labor Statistics.

But what about stock market returns offsetting some of this economic stress? The relatively good news on the 401k side -- at least as reported by Vanguard -- does not necessarily jibe with the broader reality that many financial advisers say they’re seeing. They say they're meeting with many first-time clients who have withdrawn large sums from IRA or traditional brokerage accounts during the past few years and have paid the price in missed returns as a result. 

"Almost everyone coming in to me today has tons of cash," says Lee Munson, founder of Portfolio LLC, a New Mexico-based investment firm.

And there's some data to back up those adviser claims: In the five-year period through January 2014, the Investment Company Institute reports, outflows from equity mutual funds outpaced inflows in 30 out of the 60 months -- meaning money was being withdrawn from the market at a fairly significant rate.

Of course, at one time, "going to cash" wasn't so bad. In fact, it's the way a generation of retirees saw themselves through their golden years, living off CDs and other fixed-income investments that paid respectable yields. But therein lies what many financial experts say is the greatest cause for concern over the past several years. A little more than a decade ago, the interest rate on a five-year CD was well above 5 percent, according to; today, savers are lucky if they can get 2 percent.

It's a sea change that has shaken the traditional model of retirement planning, says Greg McBride, senior financial analyst of "The sharp reversal in interest rates has dramatically cut the buying power of retirees and anyone else dependent on a fixed income," he says.

Still, McBride says that if someone saving for retirement was smart enough to stick with stocks through the past five years, they may be OK, other economic factors aside. But McBride is just not sure how many investors had the wisdom to do so. "The train may be back at the top of the mountain," says McBride, "but you're not there unless you stayed on the train."

More from MarketWatch

Jun 11, 2014 4:15PM
Just being on the ride isn't enough - you have to be wise enough to turn those paper profits into something tangible.
Jun 11, 2014 2:55PM
That's okay, they can get on after the crash.
Jun 11, 2014 3:15PM
Was that the money train? I believed that was robbed before it left the station.
Jun 11, 2014 4:00PM
"Bankrate, Inc. is a consumer financial services company based in North Palm Beach, Florida, in the United States., perhaps its best known brand, is a personal finance website"

Greg McBride, is a senior financial analyst of

He's basically an gloried used Car Salesman. He's selling you the PAST. Just as folks can be Fear Mongered out of Markets, this guy is trying to Fear Monger Folks in. He also omitted facts like global Debt Soaring 40% since the Great Recession. Which by the way was caused by Bad Debt. He omits the Fact that Japan is experiencing it's own Debt bubble.  AS is China and the Euro-Zone.

Wisdom is also knowing when you have been given a Gift and thus the process of locking in Profits. This mother of all Bull Markets has been a Gift. But it won't come without a Major Price. That is undeniable.
Jun 11, 2014 3:06PM

Yup it's a crying shame that a lot of retirees or soon to be, and others; Were given bad advice before and after the downturn...

And never fully recovered, and many are still losing money today...!

Jun 11, 2014 4:28PM
A lot of people missed the ride!!  A lot of financial instructions will lose their a** if they can't find suckers to bale them out!!!
Jun 11, 2014 7:54PM

The fact that this stock market rose on thin participation by the 0.1% is testimony to how fragile it is. It's not just about price. It's about volume and total dollar value of investment that made it rise too.


Think about it. If three people trade back and forth with each other to double the price of a stock, does that mean everyone who owns the stock has doubled the value of their holdings? No it doesn’t. Because, it only takes three people to start selling before the stock price falls to its original starting price. Watching prices alone is an illusion. Everyone thinks they are holding a lot more value than will actually be there when they all decide to liquidate.


The question to ask yourself before making any new stock purchase is similar to the question I wish I had asked myself about the housing market back in 2006. “If I can’t afford to buy my own house again, who is going to be able to buy it from me?”

Jun 12, 2014 12:44AM
THIS market is a manifestation of Federal Reserve manipulation which has pumped up values way beyond realistic assessments. Therefore the illusion of prosperity was created so when the Federal Reserve takes it's foot off the gas , what then? There is a consequence to every bubble which has been created and there will be one for this market.
Jun 11, 2014 10:20PM
Have fun Wall Street --- You know one of your boys just bit the dust. 
Better try to get those Tea Partiers to accept your bribes.
Jun 11, 2014 8:19PM
Nobody has missed anything.  An investor can get in or out of the financial markets anytime they choose to, but  systematic investing is the only safe way to invest because you do not have to 'time' the entry point.  Once you are in the financial markets do not get out.  Any so-called financial adviser that tells you that you need to enter and then exit the stock market to make money is crazy.  It doesn't work.  Look at how many misguided people lose money every day because they attempt to 'time' the financial markets.  Do not do it under any circumstances.
Jun 11, 2014 9:28PM
No other sector but Corp America was given free money loans and 90 billion a month boost like Wall St.The middle class is going away. We will be a 2 cast system. What "W" called the Haves and have nots. Life before Bush will never return. This is the new America. Get use to it.  Anyone could see oil going from $18 a barrel to over $100 once that coke head functionally MR invaded the middle east.More millionaires have been created since the "Great Recession" then ever before. Corp America runs the USA not Obama,Palin,Hillary,Romney they are puppet heads.
Jun 11, 2014 10:09PM
If they would just shut off the smoke machines and get rid of the mirrors we could see how bad things really are.Thanks Charles Pussy for another stink hole article.
Jun 12, 2014 11:14AM

If most people have not participated wonder what the real volume of trade is without the high frequency traders muddying the data?

Probably the market has been trading up on really low volume which can turn on  a dime.

Jun 11, 2014 11:18PM
Millions of Tons of Metals Stashed in Shadow Warehouses

August 9, 2013 Japan's eye-watering national debt tops one quadrillion yen

Oct 18, 2013 - U.S. debt tops $17Trillion

"Unstoppable $100 Trillion Bond Market Renders Models Useless."

Now some posters state, either you are in or out. Well your positions can actual change day to day, week to week, and even month to month. You don't have to stay fully invested in anything. Locking in profits is never a Crime. Witness all the buyouts of Companies that have never made a Dime. Many times folk have cashed out and invested in themselves aka started a Business, sometimes several. How many companies had IPOs this year?

As long as another person is willing to pay more, the GAME which is this current Stock Market pumped up on Crack-Dollars can continue to be played. But Make no mistake about it, this is a GAME of Russian Roulette played on a Global Scale. The problem is, Danger Levels rise Each and every Day. Isn't that always the Case when Monopoly money is the currency. It's just a matter of time before the Global Debt Time Bomb Explodes.

Jun 11, 2014 9:47PM
You can be in or you can be out...Riding that fence doesn't work well...And we all have choices.
Jun 11, 2014 2:48PM

So the poor and lower middle class missed the pumping up of the stock market with Obamanomics.  Who cares.   Let the morons that voted for Obama fall farther behind.  The parasitic classes had no money to buy stock with, so it was planned by Obama and the FED that they should grow poorer.

They liked being poorer the first 4 years so much they re-elected him.  Elections have consequences.  Let them suffer for another 2+ years.

Jun 11, 2014 9:43PM
finally little investors are getting smart, we know market is controlled by government and  the rich and power full one %. and they broad the market up fast, thinking that people on the side lines will jump on this fake overvalue market. they looking suck everybody in and when that happens they will pull the rug under your feet even faster . " stay smart  and be patient" all the greed ones will go under.
Jun 11, 2014 11:42PM

Stupid is as stupid does. If you stayed out of the market because of Obama you lost over 180% in stock market gains as we recovered from Bush and his Tea Party buddies plunging us into the abyss with a costly Holy War that gained us nothing. Your first clue should have been when the President assembled a team of MIT-trained genius turn-around specialists. Ironically, MSN Money writers like Jim Jubak, Tony Mirhaydari and Bill Fleckenstein lost a fortune betting on gold and telling you to bet against the market going up repeatedly, even when it did. The smart ones who figured out President Obama is the real Centrist Progressive, not the do-nothing Tea Party, have profited greatly from Dow 6,500 all the way to Dow 17,000. If you didn't, I feel sorry for your children. That's evolution. Not everybody will make it. I would hang on a little longer as we surpass Dow 20,000. God Bless America and thank you Democratic Party for your leadership! $$$$

Jun 12, 2014 8:20AM

Sorry, my poem just makes more and more sense for all you suckers on ' the ride.'


I once had money with actual value

A market shill said, 'A bridge I'll sell you'

He'd tell me when to sell, and just in time

So I bought it on margin, to the very last dime

Encouraging words went on without ceasing

I was very rich, I guessed, my wealth increasing

Then I learned the bridge I went for

Were just lines of code in a Ponzi coffer

I lost all that money with actual value

But I have a bridge I'd love to sell you

Jun 11, 2014 9:41PM
Investing is not a game, it is a full time job. Knowledge makes us a better investor. The market is a very broad term. It means investments of shares, funds, bonds, trusts, treasuries and a myriad of other products. The killer is not understanding how your investments pay you and the fees. When investing, only pay a commission for the investment once. Have a cash account set up to have all dividends and/or interest put into that account and never re-invest the funds or you will pay commission. Either build that cash fund to take disbursements and/or make investments and only pay a commission one time. Today, corporate bonds are paying 5.25 to 7.25% and they pay quarterly, semi annually or annually. I shares pay monthly. Investment knowledge will make you keep more of your profits.
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