By Inyoung Hwang – Mar 5, 2013 6:42 AM PT –
The Dow Jones Industrial Average (INDU) rose to its highest level ever, erasing losses from the financial crisis after a four-year rally fueled by the fastest profit growth since the 1990s and monetary stimulus from the Federal Reserve.
Almost $10 trillion has been restored to U.S. equities as retailers, banks and manufacturers led the recovery from the worst bear market since the 1930s. It took the Dow less than 65 months to rise above its previous high set on Oct. 9, 2007, more than a year faster than the recovery from the Internet bubble.
While the Dow has more than doubled in the four years since its bear-market low, its valuation remains 20 percent less than the price-earnings ratio at the previous peak and 15 percent below its 20-year average. Bulls say that’s a signal stocks have room to keep rallying, while to bears it shows a lack of confidence in earnings growth and concern over the Fed’s ability to continue spurring the economy.