A pedestrian walks past the statue of the bull, on Wall Street in Downtown Manhattan, New York, in the file photo.The market value of Chattanooga’s stock-traded companies increased by more than $4 billion in the first quarter of the year as investors confident in the economic recovery continued to bid up stock prices.
The Standard & Poor’s 500 stock index, one of the most widely followed benchmarks for the overall market, ended the first quarter last week at a record high, surpassing its previous record set in 2007 before the economic collapse. The S&P 500 close last week at 1562.15 brought the gains for the stock index to more than 9.7 percent so far this year. The Dow Jones Industrials Average, which eclipsed its previous 2007 record high three weeks ago, ended the quarter up 11.2 percent. The winter gains for the 30-stock Dow index are the best start of any year since 1968.
“The market probably is a bit ahead of itself in the short term, but economic conditions have clearly improved and company balance sheets are the best they have been in a long time,” said Mickey Robbins, portfolio manager for the Chattanooga investment firm of Patten & Patten. “There’s also the old adage not to fight the Fed, and in this case, you also don’t want to fight the central banks in Europe and Asia.”
With interest rates hovering near record lows, investors are drawn to the equity markets to gain some return on their savings. Economists expect that low borrowing costs, combined with the greater paper worth of those with stock holdings, should give the recovering economy an extra jolt of economic confidence, which should propel even more growth. Higher stock values also give companies more equity to buy and invest in new business ventures.
“Even if you don’t own stock, these highly publicized market highs help consumer confidence,” said David Penn, director of the Business and Economic Research Center at Middle Tennessee State University. “You see these gains in the stock market every day and it makes you feel better about the economy and more willing to spend money.”