SPDR S&P 500 ETF (NYSEArca: SPY) is just 2% away from joining SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) at new all-time highs, an event that is fueling both exuberance and caution among investors scarred by the 2008 credit meltdown.

The Dow ETF traded as high as $142.68 a share on Tuesday, eclipsing its record intraday high of $141.95 a share recorded in October 2007.

Meanwhile, the S&P 500 fund posted a session high of $154.70 a share on Tuesday, about 2% shy of its all-time high of $157.52 from Oct. 11, 2007.

It has taken these two major U.S. stock indices less than five and a half years to erase the steep losses from the financial crisis. The Dow and S&P 500 have both doubled in price since the 2009 low.

“Psychologically, it may give a sense that we have recovered a tremendous amount from the depths of the crisis,” Wasif Latif, vice president of equity investments at USAA Investments,  told Bloomberg. “On the other hand, it could create a sense of nervousness that we reached an all-time high, so how much more is there to go?”

In terms of performance, the Dow ETF is outpacing the S&P 500 ETF so far in 2013 with an 8.4% total return versus 7.4%.

The two benchmarks have a high correlation despite some key methodology differences. For example, the Dow weights its stocks by share price rather than by market capitalization like the S&P 500 and most other indices. The Dow has 30 stocks while the S&P index holds 500 U.S. blue-chip companies. [Dow ETF Eyes All-Time High]

“It has been a long, grinding recovery, but the private economy is holding its own in the face of very challenging policy and political risks,” said Stephen Wood, chief market strategist at Russell Investments, in a Reuters report on the new Dow high. “There is a lot of momentum and rotation going into equities from cash and bonds, and right now sentiment seems to have the upper hand over fundamentals.”

SPDR Dow Jones Industrial Average ETF


Full disclosure: Tom Lydon’s clients own SPY.

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