Nasdaq High, Dow Jones high, what does this mean, if anything, for the economy?

[JazzyTallGuy]

Originally Posted by davyjose

The Dow Jones is at its highest for more than 4 years; the Nasdaq at its highest since even before then. What does this mean for the economy, or does it even mean very much at all?

Does this correlate to jobs, or is outsourcing merely allowing the rich to get richer? While the rest of the country suffers?

If you are an investor or speculator you are happy. It means that corporate profits are increasing and they are expected to increase even more based on economic indicators. The stock market is considered a leading economic indicator.

The question now is this going to translate into lower unemployment especially since more and more publically traded American corporations get more of their revenue and profits from outside the United States than ever before.

[Mathguy]

Originally Posted by bchris02

The Dow will fall below 5,000, maybe even 1,000 before the end of Q1 2011. When Wikileaks releases the documents on Bank of America, that will be the end of our nation as we have known it. So much of our economy is dependent on that bank, and when it collapses, so does our national economy. This is going to make the collapse of Lehman in 2008 look like a cakewalk. Prepare for 30-40% unemployment. It will not surprise me if martial law has to be declared.

....says the guy that predicted $500 per barrel oil prices in 2010.

P.S. You forgot to mention the flesh eating zombie attack.

[Mathguy]

To the OP and other posters there are a couple components to stock prices.

1) Dividend
2) Expected growth
3) interest rate

So let me give you a simple example. You have a share of ABC stock that pays $8 dividend each year and currently sells for $100.

This is an 8% return...which you deem to be high enough given that a stock is riskier than say a 4% US Bond rate.

Now if interest rates increase and Bonds now paid 8% people aren't going to want to pay $100 for an $8 dividend....they will want a 16% return and thus will only pay $50 for the stock.

It's more complex than this and there are certainly short vs. long term impacts but in general falling interest rates increase stock prices as do obvious things like profits and the expected future profits and growth for the company.

So, in some sense...even with stable profits for companies you can see rather major impacts in the market when competing investment options like bonds etc. become more or less attractive choices.

P.S. There are other major factors like tax rates for corporations and on dividends too plus others.....