There seems to be no stopping the meteoric climb of the Dow Jones Industrial Average this season. On Tuesday, the Dow made history – again – when it traded at 23,302.20 during the day, before closing the day’s trading at 22,997.44.
Dow John’s Progress
This is the Dow’s third fastest 1,000 point climb since July earlier this year, and would also be the index’s fourth 1,000 point climb in the last one year. This is the first time the index has had so many 1,000 point climbs in a single calendar year since its inception more than 120 years ago.
The stock market seems to be brushing off all negativity, be it the North Korean threat or even political turbulence at home in the US. These recent gains have been attributed largely to the excitement generated by President Donald Trump’s promised tax reforms. These tax reforms are expected to boost stock markets via deregulation and big tax breaks.
This is also the first time in 10 years since the financial crisis that there has been decent economic growth in the country. Data – be it from materials and manufacturing or services or even jobs – show moderate but steady growth. The jobs market is the best it’s been in more than 2 years.
Additionally, third quarter performance results are being released and so far, it’s been mostly good news.
IBM is the latest of the giants to have released its third quarter earnings report, and the news was all good. The tech giant’s share prices went up 7% – a whopping $10.31- just before the start of Wednesday’s trading day. IBM’s shares were the highest they have seen since January of 2001. Thanks to this, IBM added a huge 70 points to the Dow Jones Industrial Average.
And it wasn’t only IBM’s performance that has bolstered the market. JP Morgan Chase’s earning reports were above expectations, as were Citigroup’s. Goldman Sachs also beat its targets. Morgan Stanley is beat earnings expectations. United Health also showed a spike in shares despite lower than expected revenues. Netflix was also up with subscriber numbers shooting up just before the new season; the entertainment giant’s revenues are expected to show double-digit growth.
The good news just doesn’t stop. Traditionally, the fourth quarter of the year is considered to be the most profitable and strongest quarter of the year. And as the holiday season is ushered in, this tradition continues.
According to Hussein Sayed
There are those who have been warning of the fall to come, though. FXTM’s Hussein Sayed is telling his clients to tread carefully. According to him, the indices don’t deserve their record levels – the market just hasn’t performed that well. While he isn’t recommending going against the flow just yet, he is advising caution, citing the historic 30-year low in the Volatility Index.
According to Bill McNabb, the chairman of Vanguard, investors can expect a market correction in the near future. Vanguard manages $4.5 trillion worth of funds globally. While he isn’t calling the current market situation a “bubble”, he is saying that valuations are “very high”.
The strange thing is, since Donald Trump was elected President of the United States, the stock market has just been gaining. The Dow has gained 25.4%, the S&P 500 has gained 20% and the Nasdaq Composite Index has jumped 28%. The Russell 2000, the index gauging small companies is also up 26%.
While there are realists and pessimists who warn that this extreme market euphoria has to end soon, all indicators show that the market is going to climb further before that dreaded correction.