Tags: Bogle | enthusiasm | Dow | 14000

Vanguard's Bogle: Dow 14,000 ‘Doesn’t Mean Very Much’

By Dan Weil   |   Friday, 01 Feb 2013 12:20 PM

The Dow Jones Industrial Average closed above 14,000 for the first time since 2007, and that has some market participants very excited, but not John C. "Jack" Bogle, founder of the Vanguard Group.

“Something like the Dow going to 14,000, I can contain my enthusiasm about that,” he tells CNBC. “It doesn't mean very much.”

The Dow ended Friday 149.21 points higher to 14,009.79. The Dow is now just 155 points away from its highest close ever.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

While retail investors have started to return to the market — U.S. stock mutual funds enjoyed a net inflow of $6.8 billion in the first three weeks of January — it hasn’t been a torrent, Bogle says.

Have individual investors returned to stocks in earnest? “I think the answer is no,” Bogle says. “January is seasonally a very good month. … So it's not the big pop that one would think you'd get.”

That’s actually a good thing, he adds. “When mutual fund investors pile into equities, it's usually a very negative sign for the market.”

In any case, the stock market’s rise means little for the economy, he says. “I don't think the economic signs are going to change very much.” Bogle anticipates growth of 2 to 2.5 percent for this year. “That hasn't changed whether the Dow is 14,000, or 12,000 or 16,000.”

Financial commentator Robert Wiedemer agrees with Bogle that stocks have little predictive impact on the economy.

“How much of a leading indicator really was the market in 2008?” he asked rhetorically in an exclusive interview with Newsmax TV. “I’m not sure it really led that well.” The market hit record highs in October 2007, about a year before the financial system nearly collapsed.

“I don’t know how much of a leading indicator the stock market is. In some ways it’s more of a cheerleader at times than a leading indicator,” Wiedemer.

After the Dow hit its all-time record in 2007, it fell almost steadily for the next year and a half. It lost more than half its value before starting to tick back up again, the Associated Press reported.

Before Friday, the Dow had closed above 14,000 just nine times in its history. The first time was in July 2007; the rest were in October of that year.

The last time the Dow closed above 14,000 was Oct. 12, 2007, when it settled at 14,093.08. It had reached its all-time record, 14,164.53, three days before that.

At this point, the economy may be more of a leading indicator for the stock market than the other way around, Wiedemer says. “I think fundamentally what you’ve got is a slowing economy. … Obviously it’s going to make the market a little bit more worried.”

Byron Wien, vice chairman of Blackstone Advisory Partners, sees it much the same way. With the Federal Reserve keeping interest rates at historic lows, investors have few options outside stocks, he says.

But “eventually corporate fundamentals will take over, and I think they’re going to be disappointing,” Wien tells CNBC. “I expect the S&P to end the year about where it started.”

As for Bogle’s view on Fed policy, he doesn’t like the fact that the central bank has worked to boost stock prices. “They have been acting with some success,” but the Fed is distorting the price discovery process, he says.

“I don't know if anybody down there [at the Fed] knows whether they [stocks] are low or high at any time. I think the Fed should try to stay out of trying to influence the stock market. I think let the market decide.”

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

© 2015 Newsmax Finance. All rights reserved.

1Like our page

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved