The US stock market closed yesterday only 3.0 percentage points below its all-time high on October 9, 2007. Did I jinx the rebound when I wrote about it a few months ago and started this "Stock Market Watch?" Some might think so, but since I'm not superstitious and therefore don't believe in jinxes, I'm doing it again.
The total return of the US stock market is comprised of capital gains, losses and dividends. The total return of the full-cap Wilshire 5000 closed up 0.88 percent yesterday and is within 3.0 percentage points of this high. It also happens to be 3.0 percentage points above the pre-crash 2007 close.
Investors of broad US index funds such as the Vanguard Total Stock Index Fund (VTI) are 3.8 percentage points below this all-time high. The 0.8 percent shortfall between this fund's performance and the Wilshire 5000 is due to:
An expense ratio, currently at 0.07 percent annually.Media Returns
The fact that VTI doesn't include the smallest of the micro-cap stocks that were the best performing of US stocks.
By contrast, the S&P 500 index is still 13.9 percentage points below its all time-high of October 9, 2007. This 10.9 percentage point shortfall from the Wilshire 5000 is mostly comprised of dividends carved out of the index. A smaller part comes from the fact that mid-sized and small companies outperformed the largest 500.
I asked Mint.com writer, Matthew Amster-Burton, why most of the media likes to use indexes stripped of dividends to represent the stock market. He responded that a pure index like the S&P 500 was expected and didn't require any additional explanation to readers. He noted that the financial services industry has a vested interest in the media continuing to use the raw S&P 500 index since it is so easy to beat.
What this means
Unless you were in a 100 percent stock portfolio, you should be at an all-time high today. If not, expenses and emotions are the likely culprits.
Will the US stock market hit an all-time high? My answer is a definite yes, just like it was on March 9, 2009, when US stocks had lost 55 percent of their value. Though admittedly I had no idea it would approach a new high so quickly. Fast forward to today, and I still have no idea when it will happen, I just know it will happen and I'll write about it when it does.
More on MoneyWatch