Geoff Bennett:
As we reported, this has been a big week for the stock market. Not only did the Dow Jones close above the 40000 mark for the first time today. The much broader S&P 500 and the Nasdaq also reached record highs this week.
The markets have rallied back from the recent lows of 2022, and the Dow is about 40 percent higher than when the pandemic started.
Roben Farzad joins us now. He's the host of public radio's "Full Disclosure" podcast.
It's always great to see you, Roben.
So how significant is it that the Dow hit the 40,000 mark? Because the Dow doesn't tell us as much about the economy as the S&P 500 does.
Roben Farzad, Host, "Full Disclosure": It's a great talking point. Everything is kind of feeling pricey right now, whether it's housing, crypto, gold, stocks.
Then again, at the turn of the century, there was an infamous book called "Dow 36000." And it took forever for the Dow to even visit 20000, 25000, much less 40000. There's another school's thought that says the Dow should be far higher if it was more rationally planned, for example, if Apple or Amazon was added, or if there were other components right now that more represent this economy than the old economy components that are still in it.
So — but we will take it. But nothing is really cheap in this really peculiar economy.
Roben Farzad:
Artificial intelligence. We have a semiconductor company called Nvidia, which is suddenly a $1 trillion, $2 trillion player.
A lot of enthusiasm about the A.I. boom. How is it going to affect manufacturing, construction, journalism, media, all these powerful semiconductor chips that are going to be required, the staffing, the consulting, professional services that are going to be disrupted because of that? So it's almost a parallel Internet.
We have had companies with record profits because they have pricing power. And oddly enough, I mean, that passes through to stock market investors. Time was you would worry that inflation would kill stocks. But if you're actually buying a Chipotle, if you're buying a homebuilder, you have these portfolio companies that are pushing through price increases, then you as a shareholder are partaking in that, hence Dow 40000 and the S&P at an all-time high.
Roben Farzad:
It's bizarre that we're having that conversation.
You have asset prices at a record high. Nobody can seem to afford a house. There are bidding competitions left and right. And yet the Fed is romancing this idea of cutting interest rates? I think it speaks to the weakness in the economy, the fact that those who are not partaking in this wealth effect, lower-middle-income people, lower-income people, who have to overmax credit card debt, who are struggling to make ends meet amid this inflation, the kind of the value meal shock at a drive-through at a McDonald's.
The Fed has a blunt instrument. We talked about this before. And if they ease into this, does the housing market really need stimulus right now? Does the stock market need stimulus? There's a roaring debate going on in Wall Street. And, indeed, the Fed was supposed to hike earlier, and it's been punting on it.
