Stock Market Spikes: What it Means for Rhode Island
Wednesday, February 22, 2012
The Dow Jones Industrial Average climbed to over 13,000 for the first time in nearly four years Tuesday, giving Rhode Island experts hope that the market may finally be ready to show steady improvement in the coming year.
By the time the market closed, the Dow was under 13,000, but breaking the milestone at all is considered a positive sign for all investors. The Dow has not ended the day above 13,000 since May 2008 and actually plummeted to as low as 6,547 during the great recession.
Tuesday's spike was likely thanks to a $170 billion bailout package awarded to Greece by European officials in hopes of avoiding the next global financial meltdown.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTMarket Up 10 Percent in 2012
So what does it mean for Rhode Island?
According to Michael Costello, Managing Partner at Endurance Wealth Management, the market has been performing much better in 2012 and a return to traditional market rates could be a major a boost to the Ocean State.
Costello said one area in particular that could be helped is the state's pension system, which underwent a massive overhaul last fall.
"[The] market is up almost 10 percent this year and still has some room to grow," Costello said. "Given that Rhode Island's number one issue this past year has been pension reform, the market's recent and future improvement is critical. The markets have just come through a 10 year period of terrible performance which added extra pressure to the structural problems of the pension - a return to the markets historical rates of return would be welcomed by all."
URI Expert: Step in the Right Direction
Dr. Edward Mazze, Distinguished University Professor of Business Administration at the University of Rhode Island, said the spike won't immediately create new jobs or completely turn around the state's economy, but it is a step in the right direction.
"Hitting 13,000 in the stock market will be an important boost to Rhode Island's economy," Mazze said. "Individuals who rely on stock returns as part of their retirement savings and income will benefit in the short run as will pension and health benefit programs with stock in their investment portfolios. Consumer and business confidence will improve and capital purchases such as automobiles, appliances and equipment that were postponed may now be made. Hitting a high point is a temporary win because the market still has to deal with international events, national politics and natural catastrophes beyond their control."
Mazze said the market can be a strong motivator for both individuals and companies.
"In the long-term, the benefit could be a higher stock value for publicly traded Rhode Island companies and for investors. The stock market is not an indicator of economic development but a strong motivator for individuals and companies to push forward," he said.
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