Keeping stock market milestones in perspective

The good news is the U.S. stock market reached a new high this week, which means anyone who bought in at the top in October 2007 is finally back in positive territory. That's one sad way of looking at it. But, as Morningstar's Don Phillips sees it, anyone contributing to a 401(k) plan has been benefitting all along by dollar-cost-averaging on the way up. Props to the president of the research division at Morningstar Inc. for fleshing out the silver lining at a time when so many others are still dwelling on the lost opportunities of a market cycle. “Think about how many times the past few years have been described as the worst financial crisis of our generation, and look at where the stock market is now,” he said. “It's only been a handful of years since the darkest days of the financial crisis, which should remind us to believe that, no matter what, this too shall pass.” The stock market's powerful recent run, capped by an historic first quarter of the year, is just another reminder that efficient and open markets will eventually rise. “The new market high is kind of a big deal, but I'm not sure the actual performance would deserve so much attention if it wasn't also breaking records,” said Brian Gendreau, a market strategist at Cetera Financial Group Inc, and professor of finance at the University of Florida. “We know that the market goes up two days for every one day that it goes down, so we know it has to eventually hit new highs,” he added. In terms of where it goes from here, Mr. Gendreau acknowledged a certain boost from the celebration of another milestone. “The first thing that has to happen for anything to go up is people have to notice it, and then maybe people start to think that earning a half a percent on a CD is not so great,” he said. “It's a momentum argument at this point because people like winners, and we know that the strategy of riding winners and selling losers works. So if something goes up for four months in a row and then turns around, you were right for four months and wrong for one day.”