Tags:
Journalism of Courage
About an hour after the Dow Jones Industrial Average hit a record high on Tuesday,Overland Park,Kansas-based financial adviser Brad Stratton got an e-mail from a client asking how she could make hay while the sun shines.
Stratton,a former Merrill Lynch broker who set up his own firm last year,said hes been fielding a lot of such calls lately. Many are from clients who want to capitalise on stock-market gains by purchasing second homes or investment properties. Theyre seeing opportunity,both as an investment and as a lifestyle change, he said.
With US stock market indices more than doubling since the financial crisis and the American housing market recovering,there are increasing hopes on Wall Street that a wider wealth effect could set in.
That would see people with stock portfolios and homes feeling richer and more confident,prompting them to spend more on everything from home improvements to luxury cars and meals in restaurants,creating jobs in the process.
The Dow hit a record closing high on Tuesday,part of a broad market rally that has lifted the oldest US market gauge nearly 9 per cent so far this year. The achievement is particularly noteworthy given it is set against a background of government spending cuts and tax increases.
Solid corporate earnings,unprecedented support from the cheap money policies of the US Federal Reserve and signs of improvement in the US economy have helped investors overlook concerns about measures to rein in the governments budget deficit and still-high unemployment.
The stock markets gains will be felt disproportionately by the wealthy.
Ric Edelman,a Fairfax,Virginia-based independent financial adviser,said one of his clients called this week and asked him to send 62,500 because he had decided to buy a Porsche.
That client,Edelman said,was reluctant even to buy a used Corvette for 10,000 just a few months ago,but he had since realised that his portfolio gains mean he could afford to spring for the car he really wanted.
He now accepts the fact that he can afford it and fell in love with the car and decided to buy it, said Edelman,who spoke to the client while he was at the dealership. There was no way he would have done that before.
