Stock Market: Merry Christmas

(Drivebycuriosity) - Christmas is the season for reflection but also for giving gifts. Investors received this year ample presents. Today, Christmas Eve, the U.S. stock market closed on an all-time high. The S&P 500, a gauge for the U.S stock market, gained 28% year-to-date. The rally is a response to an economy which is getting stronger. The stock market also signals growing optimism for the year 2014.

This rally also is a gift for the whole economy. Many Americans hold stocks. They got a lot wealthier this year. The rising wealth also lifts their optimism. Thus they will spend more money next year which is good for retailers, other consumer companies and their suppliers (wealth effect).

The positive impulse form the stock market is accompanied by another wealth effect generated by rising home prices and climbing incomes thanks to a healing job market. Therefore we should get strong economic growth 2014. This - in combination with a recovery in Europe, continuing growth in China, relatively low interest rates and soft commodity prices - should fuel the continuation of the stock market rally in the coming year.

Merry Christmas to everyone.