NCPA - National Center for Policy Analysis

Credit Fed Policies For Market Boom

January 20, 1998

The stock market bull run over the past seven years -- even if it ended in October -- has been the longest ever. Economists largely credit Alan Greenspan's vigorous inflation reduction and containment policies at the Federal Reserve for increasing prosperity in the U.S. during the 1990s.

  • The Dow Jones Industrial average increased by 234 percent from October 11, 1990 through 1997.
  • Stock fund assets soared to nearly $2.5 trillion last year -- from only $246 billion in 1990 -- as Americans recognized the demise of inflation and pumped cash into equities.
  • Producer prices actually fell 1.2 percent in 1997, the first such drop since 1986.

However, the lasting effects of President Ronald Reagan's 1980s free-market policies should not be overlooked, say observers. Paramount among these policies was slashing the top marginal tax rate from 70 percent to 28 percent.

  • Some analysts believe the current bull market really dates back to August 17, 1982 -- with stocks advancing nine-fold since then.
  • Reaganomics spurred new business formations which hit a record 790,569 last year, according to Dun & Bradstreet.
  • The U.S. has experienced average economic growth of 3.7 percent a year since the 1981-82 recession and a 33 percent expansion of gross domestic product.

Source: Paul Sperry, "Give Credit to Federal Reserve," Investor's Business Daily, January 20, 1998.


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