Peter Richardson, in his excellent blog, points out that the S&P large-cap industrials index – comprising the 379 constituents of the S&P 500 index not classified as financial, transportation or utility companies – closed last week at a new record of 1937.31, having surpassed a 27 March 2000 peak of 1917.64. The S&P 500, by contrast, remains 5.9% below a 24 March 2000 high of 1527.46 and 8.1% lower than its all-time peak of 1565.15 reached on 9 October 2007 – see first chart.

An investor who bought the S&P industrials index at its 31 October 2007 secondary peak would now be 5.9% ahead in price terms and 17.6% including reinvested dividends.

UK non-financial stocks have similarly outperformed in recent years, though – unlike the S&P industrials – have yet to reach a new high in 2012. The FTSE non-financials index of 347 companies closed last week at 3625.77, 2.1% above a 29 October 2007 peak of 3549.65 and 6.0% higher than a prior top reached on 10 March 2000. The FTSE all-share index, by contrast, remains 13.1% below its 15 June 2007 high – second chart.

An investor who bought the FT non-financials index at its 2007 peak would now be 22.1% ahead including reinvested dividends.

The collapse of financial stocks associated with the bursting of the Greenspan-Bernanke/Trichet/King credit bubble has depressed the headline equity market indices but will not be repeated. The performance of the non-financial indices in recent years may provide a better guide to the prospective return on an equity market investment over the medium to long run.