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Kai Ryssdal: For those who’re trying to add to their expected Social Security payouts with some gains in the markets, this has been a pretty good year or so. Today, granted, wasn’t so great. We’ll get to that. But the S&P 500 is just a couple of percentage points shy of where it was back in July of 2006. That was just about the beginning of a yearlong bubble on Wall Street. So if we subtract the S&P’s huge jump during that year before the crash, could you safely say the stock market is now back to where it was in more normal times?
That’s what our senior business correspondent Bob Moon has been trying to figure out.
BOB MOON: So you want me to define normal, do you? That’s something even the experts are still struggling with. Just ask the chief economist at Standard & Poor’s, David Wyss.
DAVID WYSS: Trying to figure out exactly what normal is, let’s face it, in the stock market, like all financial markets, equilibrium is something you fluctuate around. You sort of wave to it as you go by.
Wyss believes stocks are at what he calls “reasonably normal valuations,” but while the market might look healthy, the economy does not.
WYSS: We’re certainly not back to normal economically speaking. Unemployment rate is still approaching 10 percent, growth is still sluggish.
So is consumer spending, which makes up the bulk of the U.S. economy. And the financial system, consumers and the government are still staggering under heavy debt.
Stock market veteran Michael Panzner writes the blog Financial Armageddon. He argues the market is being propped up by something highly abnormal — the ongoing hand-out from Uncle Sam.
MICHAEL PANZNER: There is some question, particularly in an environment where the government is heavily involved, whether the markets are really reflecting reality in the same way that they once did.
And what might happen when reality bites?
Richard Sparks is chief equities analyst at Schaeffer’s Investment Research. He says lingering worries are keeping trading volumes and investor confidence abnormally low.
RICHARD SPARKS: We don’t know what will happen once we take the patient off life support, so to speak, to see if the economy can grow by itself.
Sparks says the reason stocks are up is that investors are predicting all will be well once that happens.
SPARKS: I think what the market is suggesting is that we’re on the downside of all of those problems, that over time that those problems will be worked through the system, and we’ll be back to a sense of normalcy at some point.
But as S&P’s David Wyss points out, normalcy depends on your perspective.
WYSS: Things are OK only to the extent that we’re not in freefall anymore. Up is better than down, but we’ve got a long way to go before we get back to where you were — certainly my portfolio has a long way to go to get back to where it was.
Unfortunately, a lot of Americans are finding that’s the new normal.
I’m Bob Moon for Marketplace.
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