Outlook: Dow milestone

THE DOW through 10,000 is such a milestone that it seems worth returning to Wall Street's soaraway bull market, even though this column attempted to pass judgement on it only last week. The bears and the bulk of the "serious" British press, including the "Pink 'un" and the Economist, have got it wrong again.

In recent months many have taken to depicting Wall Street as one of the biggest financial bubbles of all time. Plainly the Americans don't believe it. Readers will know that we haven't been exactly immune to the bubble theory ourselves, but we somewhat belatedly changed our minds when we saw action from the Federal Reserve to quell the turmoil in financial markets last autumn, and the subsequent strength of the recovery in equity markets.

There are still good reasons for caution, and the bears must be right in insisting that eventually there will be a correction. Increasingly, however, they become like Tony Dye at Phillips & Drew; the scale of the correction now needed to vindicate their underweight positions in US equities has become so horrendous that it would take an economic calamity of monumental proportions to bring it about.

At this juncture that hardly looks likely, despite the growing size of the US trade deficit and the risk that foreign investors will not be prepared to finance it for very much longer. It probably doesn't make sense to pile into US equities at these levels, but until the world changes, nor does it to predict calamity. Foreigners are prepared to keep pouring capital into the US not just because of the lack of alternatives, but also because American business for the time being seems to offer the best chance of innovation, advancement and growth.

The US economy cannot keep growing indefinitely at the present heady pace without a resurgence in price pressures. In a recent speech, Alan Greenspan, chairman of the Federal Reserve, wondered out loud whether the Fed had not over-reacted in cutting interest rates as far as it did in response to the financial turmoil of the autumn.

So far, however, the American economy shows little sign of giving him an excuse to raise them again. Inflation remains stoically in abeyance. There are warning signs; how far, for instance, do zero short-term interest rates in Japan help provide a prop for Wall Street? Bonds have also gone sharply into reverse so far this year. But until there are real grounds for the Fed to act, US equity prices should hold their value.

PROMOTED VIDEO
Life and Style
techYahoo Japan launches service to delete your files and email your relatives when you die
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
News
i100
Arts and Entertainment
<p><strong>2008</strong></p>
<p>Troubled actor Robert Downey Jr cements his comeback from drug problems by bagging the lead role in Iron Man. Two further films follow</p>
filmRobert Downey Jr named Hollywood's highest paid actor for second year running
Life and Style
Dale Bolinger arranged to meet the girl via a fetish website
life
Property
Sign here, please: Magna Carta Island
propertyYours for a cool £4m
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Trade Floor Support - Investment Bank - London - £350 per day

£300 - £350 per day: Harrington Starr: Our client a leading investment bank is...

Delivery Manager - Project Manager, Financial Services

£70000 - £80000 per annum + BONUS + BENEFITS: Harrington Starr: A multi award ...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

Day In a Page

Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary
Legoland Windsor's master model-makers reveal the tricks of their trade (including how to stop the kids wrecking your Eiffel Tower)

Meet the people who play with Lego for a living

They are the master builders: Lego's crack team of model-makers, who have just glued down the last of 650,000 bricks as they recreate Paris in Windsor. Susie Mesure goes behind the scenes
The 20 best days out for the summer holidays: From Spitfires to summer ferry sailings

20 best days out for the summer holidays

From summer ferry sailings in Tyne and Wear and adventure days at Bear Grylls Survival Academy to Spitfires at the Imperial War Museum Duxford and bog-snorkelling at the World Alternative Games...
Open-air theatres: If all the world is a stage, then everyone gets in on the act

All the wood’s a stage

Open-air productions are the cue for better box-office receipts, new audiences, more interesting artistic challenges – and a picnic
Rand Paul is a Republican with an eye on the world

Rupert Cornwell: A Republican with an eye on the world

Rand Paul is laying out his presidential stall by taking on his party's disastrous record on foreign policy
Self-preservation society: Pickles are moving from the side of your plate to become the star dish

Self-preservation society

Pickles are moving from the side of your plate to become the star dish
Generation gap opens a career sinkhole

Britons live ever longer, but still society persists in glorifying youth

We are living longer but considered 'past it' younger, the reshuffle suggests. There may be trouble ahead, says DJ Taylor