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An Absolutely Incredible Stock Market!

Posted on by George Mahfouz

It is absolutely incredible that this stock market is weathering the threat of impeachment! We have witnessed the strongest bull market in history! Not even the threat of impeachment can rattle this market. I do not want to get too political here but if half of this is true the markets just don’t care. Then throw into the mix the constant flip flopping that is going on with the China trade war and we are still near all-time highs? This makes me believe more now than ever that passive investing has almost got a total grip on stocks. Seemingly NOTHING can shake these markets. It’s almost like close your eyes and hang on for the ride. This worries me a bit. Why? Well for starters stocks used to be valued by their proprietary nature, growth potential, earnings power and ultimate dividend yields. We have witnessed a melt up in the stock market for more than a decade despite the shocks that have come and gone. What’s more is the geopolitical risks that are here and present and now our own President is going through an impeachment process and we still are near all time highs? Simply an absolutely incredible stock market we find ourselves in!

Well there is an old saying on Wall Street and that is the “trend is your friend!” My friends there is no denying this over the past decade. Let’s also keep in mind that the market is a lot smarter than we think. Meaning, there is no panic with this latest tape bomb of impeachment. Well one can say there is no way this President will get impeached because the Senate will not roll over. This very well may be the case. One thing we can do is pay attention to how corporate America continues to perform or not perform. At some point in time one would think that valuations will matter and that the markets will begin to pay attention to the normal risks that are inherent with any market.

Good luck to all 🙂

~George

 

 

Dow 24,000 – Bitcoin $10,000 – Why Not?

Posted on by George Mahfouz

Is this really happening? Stocks exploded to the upside on the last trading day of November. For the first time in its history, the Dow Jones Industrial Average (see chart below) traded, blew through and closed above the 24,000 mark. The Dow started the year just under 20,000 and no one and I mean no one in the who’s who of finance, analysis, technical analysis, hedge funds, institutional investors and the like, ever predicted this type of performance for stocks and the key indices on the year. I cannot even count the number of record highs that have occurred this year not only in the Dow Jones Industrials, but also the S&P 500 (chart), the Nasdaq composite (chart), and the small-cap Russell 2000 (chart). Let’s throw in Bitcoin and its year to date 10X performance and we are truly in party mode.

I am not even sure what to think? This eerily feels like the irrational exuberance environment that occurred in the mid to late 90’s and before the internet bubble imploded. However the bullish pundits are quick to point out that this time is different. Back then, whoever came out with an announcement that they just launched a website saw their stock go up. Now the pundits are pointing out that it is earnings and growth that are responsible for this torrid record setting pace we have been on all year long. This is true to some degree. But what about the euphoria in Bitcoin? What is the catalyst that has propelled this so call asset to fly up over 10 times this year? This is why the other side of the camp thinks we are approaching a bubble or at the very least nose bleed territory. Without question I feel that something is going on that makes one have to pause and take a breather here. But as we have seen all year long, don’t underestimate the power of momentum, a low interest rate environment and the Trump trade. Is it possible that the Dow Jones Industrials actually could close above 25,000 by year end? As much as I want to say and think “no way”, way! Not saying the Dow will go up another 800 points by year end, but if we do, I would not be at the very least surprised.

Good luck to all 🙂

~George

Dow Jones Industrial Average - George Mahfouz Jr

Dow 21,000 Are You Kidding?

Posted on by George Mahfouz

This market is unbelievable! As I am writing this blog the Dow Jones Industrial Average (chart) has eclipsed the 21,000 mark. This after President Donald Trump’s first speech to the joint session of Congress. Not only has the Dow breached 21,000, the Nasdaq (chart) has also set a new record this morning at 5,875, the S&P 500 (chart) has set a new record of 2,384 and counting, the small-cap Russell 2000 (chart) has hit a new record high and even the Dow Jones Transportation Average (chart) has set a new record high this morning at 9567.

It’s been exactly one month since the Dow Jones Industrial Average (chart) topped the 20,000 mark and now catapulting through 21,000! It’s inconceivable that the Dow has tacked on yet another 1,000 points in a month. The bears must be in shock! I am not exactly sure what President Trump said last night that is any different from what he has already promised during his campaign and during his inaugural speech in January. One would think that the markets have already priced in the “huge” corporate tax cuts Trump has promised. Also, I thought that the markets have also priced in the proposed $1 trillion dollar infrastructure spend. One thing for sure, right now the markets don’t care about valuations or the fact that it will take time for the Trump administration to figure out if the tax cuts or infrastructure spend as promised will even occur as designed?

I like to close my blogs out with the current technical take of the indexes. Quite honestly, the technicians are also baffled about this tape. The Dow Jones Industrial Average (chart) remains in extremely overbought conditions as does the S&P 500 (chart). The Nasdaq (chart) just re-entered overbought territory according to the relative strength index and the small-cap Russell 2000 (chart) is heading in that direction. We are witnessing one of the strongest bull markets in history!

Good luck to all 🙂

~George

 

Dow 20,000!

Posted on by George Mahfouz

There has been plenty of chatter over the past month or so as to whether or not the Dow Jones Industrial Average (chart) would surpass the 20,000 mark and what that would mean for the markets going forward. Well lo and behold, it did it! For the first time in its history, the Dow Jones Industrial Average (chart) breached the 20,000 milestone mark last week thanks in part to earnings reporting season. The Nasdaq (chart) also continues to set record highs although this week this particular index has recently been challenged by Donald Trump’s commitment to altering the H-1B visa rules which in turn could effect the tech industry in a meaningful way. The S&P 500 (chart) also remains near its all-time highs while the small-cap Russell 2000 (chart) is hovering around its 50-day moving average.

While earnings reporting season remains a key focus for investors, one cannot ignore the constant daily flow of news out of Washington D.C. President Donald Trump like no other has signed double digit executive orders in his first week of office alone fulfilling part of his campaign pledges. These executive orders range from loosening regulations in a variety of industries, to border security, to withdrawing the United States from the Trans-Pacific Partnership Negotiations agreement and to the construction of the Keystone XL pipeline, just to name a few. Without question Donald Trump means business and is acting swiftly about it. We know how the American public feels about this and most recently how corporate America is beginning to speak out, and it’s a mixed bag to say the least.

The question now is how will the markets ultimately react to the new norm, the protectionism posture of the new administration and the swift policy changes that are occurring? Well for the first time in a while market volatility (see chart below) has spiked as investors and traders alike try to digest the ultimate outcomes of such dramatic changes. In my humble opinion, vol is just getting started. Good luck to all 🙂

~George

Dow 20,000 George Mahfouz Jr