BOSTON — Jack Keleher, a package machinist at a Tootsie Roll plant in Cambridge, Mass., used to dream of retiring early. Now his whim may one day come true - thanks to a surging stock market.
Mr. Keleher has seen the value of his retirement account, much of which is invested in equities, double in the past year. As a result, he's thinking more about his golf swing these days. "If this keeps up, I could retire by 55," he says.
Keleher isn't alone. Across the country, everyone from Buick dealers to mechanical engineers is benefiting from one of the longest bull runs on Wall Street in modern history.
No longer are top executives or investors with big wallets the only people trying to take advantage of the market. The prolonged boom has drawn the attention of more average investors - sometimes with dramatic results. An investment consultant at Smith Barney in Columbus, Ohio, tells of a 20-something client who made $120,000 in the stock market last year. For the majority of investors, the reward has been watching their nest eggs and children's college funds grow.
While some have lost money on the market, and the bull run won't last forever, most individuals have been content to see their money grow in stocks and equity mutual funds rather than in the bank. After all, the Standard & Poor's 500 stock index is up 21.56 percent since the start of the year.
"Enthusiasm is quite high" among average investors, says Cheryl Rowan, vice president of investment strategies at Merrill Lynch & Co. in New York. Although the investment house has been preaching a message of caution, "investors don't seem to be overly concerned," she says.
With a few dips or "corrections," the market has been charging ahead for six years. It was only a year ago that the Dow Jones industrial average crossed the 5000 mark. It roared past 6000 in October. Since then, it has continued to set records - including on Friday.
But more than stellar returns are bringing investors to the table. For one, baby boomers - who represent a significant portion of investors - are starting to think seriously about retirement. And widespread concern that Social Security won't pay full benefits for boomers when they retire has increased the pressure to save and invest.
"A lot of investors have been introduced to the market because they are forced to save for retirement," says Christopher Low, a senior economist at HSBC Markets in New York.
In addition, because interest rates are relatively low, savings accounts and certificates of deposit produce returns many regard as inadequate. Today, people's portfolios tend to be more heavily weighted in equities. "There's a sense that any money not in the stock market is money not doing well," Mr. Low says.
Currently, more than 1 in 3 households invests in stocks either directly or through intermediaries, such as mutual funds - a number that has risen steadily since 1983, according to a study by economists James Poterba at the Massachusetts Institute of Technology and Andrew Samwick at Dartmouth College in Hanover, N.H.
Although analysts point out that the euphoria surrounding the market is luring some to dabble in stocks directly, most Americans invest in stocks via mutual funds, often held in 401(k) or 403(b) retirement plans, and individual retirement accounts (IRAs).
And they've been pumping it in. For example, nearly $178 billion has flowed into equity mutual funds in the first three quarters of this year, already breaking the record set in 1993, according to Standard & Poor's.
"[The bull market] is probably forcing people to continue to put money into mutual funds on a regular basis," says Astrid Adolfson, an economist at MCM Moneywatch in New York.
Another gauge of the level of excitement about the market is the number of investment clubs cropping up across the country. In the past year alone, stock-market clubs - in which people invest together in one portfolio - have increased 58 percent to more than 25,000, notes the National Association of Investors Corp. (NAIC) in Madison Heights, Mich., the umbrella group for these clubs nationwide.
"They're coming in by the droves - we're getting 200 to 300 new members a month," says Peg Keleher, president of the Greater Boston New England Council of the NAIC. Membership should double to 15,000 over the next year, she predicts.
"If there were a serious correction, you'd probably see them head the other way," she quips.
The bull market is also drawing in 20-somethings. Investment clubs on college campuses are surfacing. The California Institute of Technology in Pasadena, just opened a dormitory for student entrepreneurs and investors.
This generation, however, tends to be bolder about jumping into the market than others, in part, analysts say, because it has never experienced a bear market.
Despite the fact that people are sitting on growing nest eggs, most don't feel like splurging - that new car or Caribbean vacation is not on the menu. Part of the reason, analysts say, is that since most Americans invest indirectly, they are more isolated from the ups and downs of the market. Also, profits in 401(k)s and IRAs can't be spent before retirement without a penalty.
"These investors don't seem to be as emotionally involved in their investments," says Keith Mullins, a research analyst at Smith Barney in New York.
Gordon Bakken of Wichita, Kan., has seen his 401(k) and IRA get a boost over the past few years. Still, he says he has no intention of celebrating. "Sure I feel very good about it and this helps, but I don't get overly enthusiastic," says the mechanical engineer. If and when the market falls, he contends, these good times will help balance out the bad.
In addition, most of the stock owned in the United States is concentrated among a small number of investors. So the average investor isn't seeing huge gains.
Even when equity holdings are defined broadly, the top 5 percent of US households own a full 78 percent of the total value of all stock, according to the study by Mr. Poterba and Mr. Samwick. Eighty percent of households hold just 1.8 percent of the value of all equity holdings in the country.
Many investors are beginning to wonder just how long this bull market can keep charging.
"The market is rising fast, but I'm not too sure people are enjoying it," says NAIC president Kenneth Janke. "They're waiting for the shoe to drop."
Robin Jareaux, a self-employed illustrator in Boston, Mass., started investing in stocks six years ago to help save for retirement. Recently, however, she converted half of her stock holdings to cash and her husband has gotten out of the market completely. "I bought a stock that I lost $1,600 on," she says. "That's what stands out the most in my mind."
Holdt Andrews, an investment banker, says he took all of his money out of stocks before the market hit 5000. The resident of Jupiter Island, Fla., says: "Historically, you can only push something so far."
The Dow's 1996 Rise, Company by Company
Share prices for each of the 30 stocks in the Dow Jones industrial average
End of '95 Dow hits 6000 Latest close
12/29/95 10/14/96 11/22/96
AT&T* $64.75 $38.75 $37.13
Alcoa 52.88 58.75 62.38
Allied Signal 47.50 64.63 73.50
Am. Express 41.38 47.38 51.88
Beth. Steel 13.88 8.00 9.13
Boeing 78.38 98.13 98.63
Caterpillar 58.75 74.13 79.88
Chevron 52.38 66.88 67.38
Coca-Cola* 74.25 49.38 50.88
Disney 58.88 64.13 72.25
DuPont 69.88 96.00 93.00
E. Kodak 67.00 77.88 81.63
Exxon 81.13 87.63 92.88
Gen. Electric 72.00 95.00 101.13
Gen. Motors 52.88 51.88 57.50
Goodyear 45.38 45.75 49.38
IBM 91.38 130.00 158.63
Intl. Paper 37.88 42.88 43.00
McDonald's 45.13 46.63 47.88
Merck 65.63 71.63 82.75
Minn. Mining 66.38 71.38 84.75
JP Morgan 80.25 83.63 90.38
Philip Morris 90.25 93.50 102.38
Procter & Gamble 83.00 95.50 109.25
Sears Roebuck 39.00 49.50 49.25
Texaco 78.50 101.75 100.38
Union Carbide 37.50 43.38 45.88
United Tech. 94.88 122.88 135.00
Westinghouse 16.38 18.75 18.63
Woolworth 13.00 21.00 24.00
*Stock split (Coca-Cola) or spin-off (AT&T spun off Lucent Tech.) reduced price.