The Dow Jones industrial average is closing in on a record high, an accomplishment that looks particularly remarkable given that stocks suffered their worst sell-off of the year as recently as Monday.
The Dow on Thursday rose as high as 14,149, which is just 15 points shy of its high on Oct. 9, 2007. It dipped into the close of trading, finishing the day down about 21 points at 14,054.
It is not unusual for major indexes to score new highs during bull market runs. But what makes this one stand out is the speed from which the Dow has recovered from the recent financial crisis.
The Dow fell 54 per cent between 2007 and 2009, marking its worst setback since 1929.
While the blue-chip index took 25 years to recover from that horrendous slide, it has managed to claw back – well, almost – from the most recent bear market in just 5 1/2 years.
That is lightning-fast when you consider the level of despair at the market's low in 2009.
"It tells you that however great the Great Recession was, it wasn't the Great Depression," said Avery Shenfeld, chief economist at CIBC World Markets.
Corporate profits have recovered, and are indeed at record highs.
As well, the U.S. Federal Reserve has taken unprecedented measures to boost economic activity by holding its key interest rate exceptionally low and buying assets under a program known as quantitative easing.
Still, the stock market recovery comes as investors look awfully skittish about the current climate, causing a lot of head-scratching among market watchers.
"One unique characteristic of this bull market is the fact that there is very little commitment on the part of investors," said Bespoke Investment Group on its blog.
U.S. stocks suffered their worst sell-offs of the year on Monday, when Europe's ongoing sovereign-debt crisis looked set to flare up following Italian election results and a potential move away from austerity measures.
Last week, stocks also cratered after investors learned that some Federal Reserve officials were growing concerned about the downside risks associated with stimulus efforts – raising concerns that economy-boosting programs could be withdrawn sooner than expected.
The grim news, along with weak stocks, pummelled investor sentiment.
According to the latest weekly survey from the American Association of Individual Investors, bullish sentiment among small investors fell to just 28 per cent – a 14 percentage point drop in just one week, for its worst decline in more than two years.
What has changed since then? Not a whole lot, actually.
Ben Bernanke, chairman of the Federal Reserve, has tried to assure markets that the central bank will continue to support the economy as it recovers.
And in Italy, a government bond auction this week went well. That eased some concerns that indebted European countries are again facing surging borrowing costs, though Mr. Shenfeld is surprised by the market's ability to shake off this threat.
Meanwhile, the U.S. economy continues to plod along. Growth in the fourth quarter was revised up to 0.1 per cent, from an earlier estimate of a 0.1-per-cent contraction.
That's hardly a reason to cheer. But this bull market hasn't exactly required great news before.