The Dow Industrials rose to a record 21,000 this week, as President Trump struck a “presidential” tone in his Tuesday night speech providing potential for both sides of Congress to strike common ground. The milestone on Wednesday came barely a month after the average hit 20,000 on January 25th. The mid-week sprint matched the previous record for 1,000-point gains set in 1999 when the Dow ran from 10,000 to 11,000 in 24 trading sessions. Thursday saw some profit taking in the wake of the jump, but traders re-entered on Friday in buying mode – a good technical indicator. The Dow managed a 0.9% gain for the week closing a 21,006, the S&P 500 tacked on 0.7% and the NASDAQ about 0.4%. The move was widespread, with most sectors ticking higher, especially energy and healthcare stocks despite oil remaining steady and the President’s remarks regarding high drug costs. Telecoms were the weakest group, giving back nearly 1% on the week.
The latest estimate of gross domestic product (GDP) increased at an annual rate of 1.9% in the fourth quarter of 2016 and, along with employment growth and inflation prospects, the Federal Reserve will likely pull the trigger on another short-term interest rate hike at its next meeting later this month. Figures on sales of new and existing homes, manufacturing, consumer confidence and orders for durable goods all suggest that sustainable, if modest, economic improvement is still the rule. Pundits are predicting a slightly better than 50-50 chance of a move.
Buoyed by the promise of lower taxes and reduced regulations, and encouraged by improving earnings, the risks for socks are elevated which leaves little room for disappointment. Nonetheless, Warren Buffet believes “Stocks actually are on the cheap side compared with historic valuations”. The difference of opinions on value is what makes markets, but investors should continue to maintain their long-term investment strategy and leave the day-to-day gyrations to the traders.
On a personal note, my second course “Introduction of the Stock Market” at SUNY Orange began last week and I welcome the new class as we explore the details of investing. For those who missed signing up for the spring term, the class will again be scheduled for June. Click her for details.
Here is the answer to last week’s trivia question: About how many U.S. publicly listed companies currently exist? 4,985, 5,734, 6,021 or 6,887. Answer: 5,734, about as many as the early 1980’s and 37% below the peak in 1987.
Today’s Trivia Question: “CAR” is the ticker symbol for what company? Fiat-Chrysler, AutoZone, Cooper Tire & Rubber or Avis Budget Group.