Dow

All Time High For The Dow!

Posted on by George Mahfouz

Yet another all-time high was set for the Dow Jones Industrial Average! (see chart here and below). Stocks continuing their winning ways especially for the Dow Jones Industrial Average which closed out the month of August at 41,563 setting a fresh record high. The S&P 500 (see chart here) is flirting with a new high as well, however, both the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) are playing catch up.

For some the stock market performance here in 2024 is a head scratcher. Pundits are asking why is the stock market continuing to outperform despite the headwinds our country faces? The immediate knee jerk response to that question is seemingly easy to answer; inflation is cooling, and the Federal Reserve is signaling rate cuts. I am not so sure it is that easy of an answer. Sure, inflation is indeed adjusting down and the Fed seems to be ready to cut rates, however, I would also have to add in that the calendar is also playing a role. Historically, election years tend to positive years for stocks, this along with the Fed seemingly ready to cut rates is a set-up for market outperformance, hence all-time highs have been plentiful throughout this calendar year. That being said, I would not be surprised to see volatility pick right back up as we head into September. Historically, September is a tough month for stocks, (click here). Pundits call it the September effect which basically is an historical average over the past 100 years on how the market performs in the month of September and that metric demonstrates a consistent downward trend in this given month. Now past performance does not guarantee future results, but this is something I will pay attention to.

Whatever the case is, we are now heading straight into year end with a Presidential Election to boot. I do expect a lot of action and volatility straight ahead. Good luck to all 🙂

~George

 

Dow 40000, Now What?

Posted on by George Mahfouz

Last month we witnessed the Dow trade above 40000 for the first time ever and now the question is, now what? Yes, that’s right, the Dow Jones Industrial Average (see chart here) eclipsed the 40000 marks for the first time in its history. I remember back in 1999 there was a book that I bought titled “Dow 40000” by David Elias. Mr. Elias predicted that the Dow would hit 40000 by the year 2016. Well, that might have been a bit too optimistic regarding the timeframe, but as we just witnessed, his prediction of Dow 40000 came true. For me as I read that book, the Dow was trading in the 10000 zone, and this was nearing the height of the dot-com boom. My view at that point in time was how in the world can the Dow Jones Industrial Average triple from here after it more than tripled during the dot-com boom. It took 25 years to do so and now the question on many investors’ minds is “has become was a short-or near-term top?” Based on how the Dow has responded after reaching that record high of 40000, it sure appears that way.

After topping 40000, the Dow Jones Industrial Average (see chart here and below) the Dow gave back 2000 points over the course of the next week or so and then on Friday bounced back to close at 38600 which is right at its 100-day moving average. The Dow wasn’t the only index to reach record heights. The Nasdaq Composite (see chart here) also hit an all-time high last month topping the 17000 mark, the S&P 500 (see chart here) hit an all-time high of 5346 while the small-cap Russell 2000 (see chart here) is seemingly locked in a trading zone between 1900 and 2100.

I remain in awe of the strength of the stock market despite all the headwinds our economy faces and with the geopolitical backdrop. We also cannot forget this is an election year like no other. To that end, I am expecting volatility to rear its head this summer and as we head into the fall.

Good luck to all 🙂

~George

 

 

Dow record in sight…

Posted on by George Mahfouz

Stocks continue to head north this week with the Dow Jones Industrial Average (chart) flirting with an all time high. For the week, the Dow (chart) closed up 0.64%  just 74 points away from notching a record, the Nasdaq (chart) finished the week up 0.25%, the S&P 500 (chart) +0.17% and the small-cap Russell 2000 (chart) closed the week out basically flat. Looking at the year to date performances of these key indices and you will see eye-popping gains of 7.52%, 4.98%, 6.45% and 7.70% respectively.

This wasn’t the case on Monday when the markets nerves were tested with fears of instability out of Italy and the ongoing sequester uncertainty here at home. This sent stocks spiraling with the Dow shredding over 200 points. However, true to its form, stocks regained their footing on Tuesday and throughout the rest of the week once again demonstrating how resilient equities are in this Fed friendly environment. Even Gold bounced off of its recent lows to close at $1572.30 a troy ounce, although still trending downward.

Looking ahead to next week, I am cautiously optimistic that we could see a record on the Dow with the caveat of headline risks out of Washington. If the sequester issue does not get some type of formidable resolution out of Congress, we will most likely see consumer confidence rattled and market confidence challenged. Chances are neither side of the aisle wants to be held responsible for the looming automatic spending cuts which in turn would be a serious blow to our fragile economy. Nonetheless, it would be wise to tread these markets carefully and make sure to always consider using protective stops in your portfolio. Good luck to all.

Have a great weekend and profitable March 🙂

~George