The Dow Jones Industrial Average rose 0.2 percent on Monday to close at another all-time high. It has now risen 26 percent this year, which would be its biggest gain since 1996.
The S&P 500 has risen 29 percent this year, which would be its biggest gain since 1997.
The gains in the US stock market, however, are eclipsed by those in Japan. The Nikkei 225 rose 0.7 percent to close the year with a 57 percent gain, the most since 1972.
The rise in Japanese stocks have been fuelled by a fall in the yen, which has lost 21 percent against the US dollar this year, its biggest drop since 1979.
The fall in the yen is helping to push up inflation in Japan. Unfortunately, wages are not expected to keep up with consumer prices. A poll of 16 economists by Bloomberg showed that labor cash earnings are expected to increase 0.6 percent in the year starting 1 April while another Bloomberg survey showed that consumer prices are forecast to climb five times faster at 3 percent.
The US worker may not be much better off. A Bloomberg report on Monday said that rising income inequality is starting to hit home for many American households.
As the gap between the rich and poor widened over the last three decades, families at the bottom found ways to deal with the squeeze on earnings. Housewives joined the workforce. Husbands took second jobs and labored longer hours. Homeowners tapped into the rising value of their properties to borrow money to spend.
Those strategies finally may have run their course as women’s participation in the labor force has peaked and the bursting of the house-price bubble has left many Americans underwater on their mortgages.
“We’ve exhausted our coping mechanisms,” said Alan Krueger, an economics professor at Princeton University in New Jersey and former chairman of President Barack Obama’s Council of Economic Advisers. “They weren’t sustainable.”
Still, the US housing market may be steadying after some recent weakness. The National Association of Realtors reported on Monday that pending home sales in the US rose 0.2 percent in November, the first gain in six months and after having fallen 1.2 percent in October.
“We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014,” NAR chief economist Lawrence Yun said in a statement.
The outlook for housing in the UK also appears positive. A report from Hometrack on Monday showed that house prices in England and Wales rose 0.5 percent in December. The mismatch between supply and demand that helped to drive prices higher this year will persist in 2014, according to Hometrack.
While rising stock and house prices have raised fears of bubbles, it is ballooning government debt that may be the real threat to economies, not least in China.
The National Audit Office reported on Monday that the results of a debt audit showed that liabilities carried by local governments in China surged to 17.9 trillion yuan as at the end of June, up 67 percent from the end of 2010.
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