The S&P 500 surpassing the 2000-threshold in intraday trading on Monday is a big deal. Too bad, though, that the achievement was driven by hopes for more central bank stimulus.
The bull market is now five-and-a-half years old, and in this time U.S. stocks have tripled from their bear-market lows in early 2009.
When the S&P 500 rebounded to 1,000, in August 2009, the gains coincided with hopes for a rebounding economy, which had previously contracted for four straight quarters during what has since been called the Great Recession.
The index crossed the next 500-point threshold in January 2013, rising above 1,500 amid robust earnings and outlooks from the likes of International Business Machines Corp., Netflix Inc., Google Inc. and Procter & Gamble.
And now? We're stuck clinging to hope that help is nearby.
The latest gains form part of a global equity rally after Mario Draghi, the European Central Bank president, signalled in comments at Jackson Hole that the ECB is ready to try something new to ward off deflation and boost the euro zone's economy.
That's right, we're back to "things are so bad, they're good" territory.
Previously, euro zone governments had pursued policies of austerity, or slashing government spending. But Mr. Draghi said that governments need to move away from austerity and pursue a "more growth-friendly composition of fiscal policies."
As well, some observers believe Mr. Draghi is laying the groundwork for a policy move resembling the Federal Reserve's quantitative easing, or bond-buying program. Not only did he say in prepared remarks that the ECB stands "ready to adjust our policy stance further," but he also added in off-the-cuff remarks that low inflation is probably not a temporary phenomenon.
"The Governing Council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term," he said.
European stocks moved higher following Friday's remarks. On Monday, Germany's DAX index and Spain's benchmark index rose 1.8 per cent each, and France's benchmark index rose 2.1 per cent.
Central bank stimulus – and sound bites – have certainly had a big impact on stocks in recent years. The Fed's three rounds of QE, particularly the open-ended bond-buying of the third round, were widely credited for U.S. stock market rallies.
And Mr. Draghi single-handedly soothed rattled nerves with his remark two years ago that the ECB will do "whatever it takes" to save the euro. European blue-chip stocks have risen more than 50 per cent since then.
But this sort of assistance is starting to look a little sad. The current record-high level of the S&P 500 should be a reflection of good times – or, if you prefer, a reflection of a global economy that has plenty of recovery left in it.
Instead, what we're seeing are more problems, and the hint of more extraordinary solutions designed to get economies back from the brink of deflation and recession, particularly in the euro zone.
Meanwhile, just about everyone agrees that U.S. stock prices are stretched relative to earnings and revenues, and that the S&P 500 has gone far too long without suffering an official correction of 10 per cent or more.
The S&P 500 moved from 1,500 to 2,000 in just 19 months and without suffering a setback of more than 6 per cent. The next 500 points will be a considerably bumpier ride – and potentially a lot longer.