IN 1958 the U.S. just missed the moon. But Wall Street's Bull made it—and over—with ease.
Starting in January, stocks on the big board took off with a whoosh that by December sent the market up 37% and carried every average out into space. Coming in a time of recession, the market's amazing moon shot baffled most of the experts. But it was no mystery to the investors whose buying sent it up. In 1958 they could plainly see for the first time that the U.S. was blessed with a new kind of economy, different from any ever seen on the face of the earth.
The new economy is not the fruit of revolution but of the rapid change of U.S. capitalism to meet the vast, growing needs of the population it serves so well. In the new economy many of the old classical rules of economics no longer apply; over the years the U.S. has made and learned new rules all its own. The test—and the proof that the U.S. had learned its lessons well—was the recession. It not only highlighted the changes in the economy, but proved beyond doubt that the U.S. could take a hard knock and come bouncing quickly back. In the new economy:
¶Consumers no longer tie their spending to fluctuations in the growth cycle. The U.S. is so wealthy that even in recession one-third of its income proved to be extra, "discretionary income," above and beyond necessities, money that could be and was used to power continuing booms in industries that were once termed luxury.
¶Businessmen no longer run for the storm cellar at the inevitable williwaws of economic life, but continue to plan and expand for the long term.
¶Labor no longer faces drastic cuts in wage rates—and buying power—in times of recession. Equally important, the accelerating shift to the service industries from manufacturing has made overall employment more stable.
¶Government no longer feels bound to buy its way out of recession with tax cuts and many-billioned programs of every type. In the new economy, built-in stabilizers automatically operate to take up the slack, keep income, and thus consumption, at high levels.
For these reasons, the recession of 1958 was the least worrisome of the 25 economic downturns in U.S. history.
Investors' Market. Better than anything else, Wall Street's high-flying Bull symbolized the new economic power and stability of the U.S. Within twelve months the Dow-Jones industrials went up 137.48 points from 435.69 to a historic high of 573.17 in the closing weeks of 1958; utilities jumped 20.42 points; rails soared 58.72 points. There were still skeptics who had seen such high-flying stocks and heard such talk of the new prosperity before—in 1929. But in 1929 the market was founded on fantasy, frenzy —and credit. In 1958 the Bull's flight to the moon was fueled almost entirely with cash, clear evidence of the investors' confidence in the U.S.'s economic health.
Wall Street still has its speculators. But Merrill Lynch, Pierce, Fenner & Smith, in a survey of 300,000 big, little and medium-sized investors, discovered that the vast majority bought for long-term investment and had no intention of selling, despite the recession. Even American Telephone & Telegraph Co., that staid old lady of the utilities, is getting to be a growth stock.
Long-term investors pushed A.T.&T. up 20% in