Dow Jones Reaches New Heights Beyond US Housing Slump

By Stewart Douglas

The Dow Jones closed at a record peak yesterday, reflecting major growth in retail and consumer spending, and several large-scale industry takeover bids.  The news comes in spite of a sharp slump in share value earlier in the week, largely attributed to the faltering housing market across the US.

The Dow Jones, America’s predominant share index, has continued to surpass expectation and previous records throughout a record year.  Despite the sharp drop in share prices on Wednesday, a consequence of the slowing US housing market, the index rose to a record 13,800.

On the back of an increasing trade deficit and growing economic unrest, the news comes as somewhat of a surprise, showing that consumers are continuing to spend rather than save.

Meanwhile, the slow US housing market is predicted to have a profound effect on the economy over the course of 2008 as rising interest rates put the cost of borrowing beyond many.

Academic forecasts suggest there is a greater than 25% chance of economic recession over the next twelve months, with growth for 2007 predicted to come in at just 2.3%, with growth of on 1.3% over the first quarter of 2007.

Increasing interest rates have increased the cost of borrowing and thus put pressure on the housing market.  Particularly hitting the sub-prime market, lending to those with poor credit ratings, the rising interest rates have seen a turn from buying to renting housing.  Additionally, a number of other economic variables have led to a dip in confidence in the US markets over the last few years.

However, with the recent positive performance on the Dow Jones it seems that investors may already have forgotten about the housing market, and strong results from Wal-Mart amongst others continue to prop up the world’s most recognizable share index.