The stock market hitting new highs should not surprise anyone. Stock indexes do not report on an inflation adjusted basis. GDP is above what it was when the market crashed in 2008. GDP growth is slow, and has not kept the pace we would like. This is a case of something growing less slowly than we need it to, not going down. In 2000 the stock market was in a bubble. In 2008 the economy crashed. If stocks were not in a bubble in 2008 we should expect that they will reach new highs as GDP passes the point it was at in 2008. That's the good news, now let's talk about the people who are about to lose their shirts.
The crash of 2008 saw the velocity of money (how fast people spend money) take a nosedive.
Things softened a bit int he Spring. The Fed was created in 1914 in response to the Panic of 1907. The Panic of 1907 occurred when not enough physical currency became available to settle harvest related debts (paying field hands in cash and the like). That extra money for agricultural use got taken out of the economy this spring.
On the other hand, some wealthy Americans are about to see their portfolios take a tumble. Some leaders of the Republican Party have been pushing the faithful to buy gold. In doing so they've been claiming that hyperinflation is right around the corner. Gold makes a nice paperweight. Inflation is at 1.5% and dropping. On the surface, it appears that all the fear mongering created a gold and commodities bubble. That bubble is now popping as investors realize:
1. Gold is a Paperweight
2. Stocks pay Dividends
3. The Stock Market is Going Up Faster than the Price of Gold
What does this mean for Democrats. It means Republican Leaders have told their base to speculate in a commodity! Like any good pyramid scheme, it only works if people keep buying in. Eventually, and probably very soon, that is going to stop. Those left holding the bag are going to find themselves very unhappy with the Republican Party when that happens.
Then their is the fact that the S&P 500 (looking at the statistics for VOO, an S&P 500 exchanged traded mutual fund) has a one year appreciated of 16% and a 2% dividend. That party is probably either over or soon to be over. Ont he other hand, stock prices are likely to continue rising, though not as fast. At the same time a 16% return on the S&P 500 is like ringing the dinner bell in the financial markets. If the Republican party starts playing debt and deficit games they risk screwing up the stock markets returns. Getting between investors and a 18% return is an invitation to get squashed.
What Democrats should do is note the increase in the stock market and claim that we need to repair and improve our infrastructure to avoid bottlenecks as the economy improves.