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Bull market connecting Wall Street, Main Street

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If you notice your neighbor acting edgy lately, understand why: It's the stock market. Stocks have been acting erratically of late, so its logical the mood of stockholders might be erratic.

Never in American history have so many people placed so much faith in stocks. Never in history has there been a bull market like this one. Never before has there been the potential to lose so much in financial assets.Moreover, Americans have built an intricate financial structure based on their investment hopes, one that involves pensions, tuitions, houses, tax deferments and financial legacies. That's a lot to be riding on the stock market.

Expectations too have been riding high. You don't have to search far to read that this is a new era, one in which the old standards need not apply. And you can find plenty of five-digit Dow Jones forecasts, even if price-to-value ratios are already out of whack.

That's because of the future. Americans have placed a huge bet on the future, believing it will become a technological marvel that will make business more productive, workers better paid, life more pleasurable. Consumer confidence measurements are consistently high.

Already, people speak about the wealth effect, which creates a psychological disposition to spend on luxuries, such as newer cars and $200 family outings at the ballpark. And all that credit?

"Don't worry about it - we might be cash poor but we're rich in assets."

Social critics will tell you that all this is a departure from the old American ethic of hard work and slow but somewhat steady progress. They'll often comment that people today are in too much of a hurry, too greedy, and that sooner or later haste makes waste.

But you can also argue that what's going on today is typically American: faith in the future, inventiveness, self-reliance, creativity, entrepreneurial risk-taking. And isn't America the story of material progress, of generations living better than the ones before?

With the stakes so high, no wonder your neighbor might feel nervous.

For the first time, Americans households have more invested in stocks (28 percent) than in houses (27 percent). In 1990, stocks accounted for just 12 percent, while real estate measured 33 percent.

Wall Street today intersects with Main Street.

It is more extraordinary when you consider that housing prices have been rising strongly; the median price for an existing home reached $125,900 in the first quarter of the year, a 5.4 percent rise in just one year. But stocks have been rising even faster.

Changed lending standards have also contributed to the relative decline of home investments vs. stocks. You can buy houses with very little down these days and pay relatively low mortgage rates. No wonder ownership rates are near all-time highs.

Perhaps more significantly, you can borrow great amounts on your home's increased market value via the equity loan or second mortgage. It adds to the wealth effect, giving you the freedom to use funds for other purposes, such as stocks and mutual funds.

All this adds to the possibilities for greater financial gains and, of course, to the risk. And so it isn't at all difficult to understand why it's unnerving to your neighbor to read about the financial troubles in Indonesia, Korea, Japan, Russia and Mexico.