The dot.com bust, the post-Millennium economic downturn and the financial fears awoken by the attacks of 11 September 2001 - the stock market scars of all of them were finally erased yesterday as US shares passed their peak of more than seven years ago.
The S&P 500, the broadest measure of the US stock market and the one most closely followed by the professionals on Wall Street, passed its closing record level of 1,527.46, which it set on 24 March 2000.
In so doing, it has more than doubled in value since the nadir of 2003, when the US was planning its war in Iraq and the global economy was yet to emerge from the doldrums. At lunchtime yesterday, the index had passed 1,528, up almost 6 points over the morning.
Shares are being driven higher by a boom in merger and acquisition activity, which in turn has been fuelled by the continuing confidence in the economic outlook for corporate America. The prospect of takeovers from cash-flush private equity firms have also lifted share price valuations across numerous industries.
"There are a lot of sources of support for the market - robust M&A, investment by private equity and share buybacks. And I don't see any diminution in M&A activity at all," Brian Gendreau, an investment strategist at ING Investment in New York, said.
The Dow Jones Industrial Average, the most visible barometer of the US market, has been hitting record highs since last October. However, it measures just 30 shares, chosen for their historical track records as bellwethers of US industry. The S&P 500 accounts for the vast majority of the market value of the US stock market - making it more similar to the FTSE 100 in the UK.
The return of the S&P 500 to dotcom boom levels is set to restoke the debate over valuations and whether some sectors are becoming overheated - particularly if a weakening US housing market leads to a wider downturn. However, Milton Ezrati, a market strategist at Lord Abbett & Co, said corporate finances are in great shape.
Since 2002, asset growth has outpaced liabilities growth, something that seldom ever happened during the past 60-plus years, especially for such an extended time, Mr Ezrati said. The ratios of assets to liabilities and debt to net worth are stronger than any time in the past 20-plus years, he said.Reuse content