Daily Management Review

Dow Jones overcomes 1000 points for eight trading days


01/19/2018


The stock index Dow Jones Industrial Average on Wednesday closed above the mark of 26,000 points for the first time. The index overcame the distance from 25,000 to 26,000 points in just eight trading sessions, which is a record in its 120-year history, notes The Wall Street Journal. At the end of the day, the index rose by 322.79 points (1.3%) to 26115.65.



bfishadow via flickr
bfishadow via flickr
The Nasdaq Composite index, if we take inflation into account, exceeded the maximum achieved at the peak of the techno boom in March 2000, and set a historic record. Data adjusted for inflation show the purchasing power of money invested in shares of companies entering the index. Nasdaq nominally exceeded the bubble peak (5,048.62 points at the close on March 10, 2000) on April 23, 2015. On Wednesday, Nasdaq rose 1% to 7,298.28 points. The S&P 500 added 0.9% to 2802.56 points.

More and more individual investors are joining the growth, many of whom, frightened by the 2008 crisis, were afraid to return to it for almost all nine years. Investment funds are also building up investment, seeing reasons that are more fundamental in the strength of the market. The US economy is accelerating growth, companies' profits are growing, exceeding analysts' forecasts; in addition, the reduction of the tax rate because of the reform from 35 to 21% will further increase profits, thereby justifying the high prices of shares. Now the P/E ratio (the ratio of capitalization to profit) seems to many observers to be too high, but it should decrease as a result of increasing profits.

"Investors continue to bear in mind all the consequences of changing the tax code. It seems they are increasingly concluding that this will have a positive impact on profits, which, in turn, justifies higher stock prices, "notes Eoin Treacy, co-publisher of the investment newsletter Fuller Treacy Money.

Apple’s shares rose 1.65% after the company said it would return profits from its foreign accounts to the country, where it holds $ 252.3 billion (data for November 2017) and will pay a one-time tax of $ 38 billion. The company also announced a $ 30 billion investment in the US within five years. Its market capitalization amounted to $ 896.3 billion at the close of trading.

 Investors who have come to the market late can still make good money. On average, about 40% of growth during the long-term bull market falls on its first 12 months, and for the last 12 months - 32%, according to Longview Economics.

Jeremy Grantham, co-founder of the management company Grantham, Mayo, Van Otterloo, said recently that he was observing the first signs of increased excitability of market participants who accompany the inflation of the bubble. Among them, for example, are the increased media attention and authors of investment sites and publications to the group of the most popular stocks papers of major technology companies). In his opinion, the probability of the take-off of the S&P 500 index to 3400-3700 points in the next year or two exceeds 50%.

It's not yet euphoria, during which the bull market dies, but from the long-term phase of scepticism, the market is moving into a phase of optimism, Treacy believes. It can last for more than a year, although the rally of recent weeks has been very rapid and consolidation in the short term would have been a healthy phenomenon, he said.

source: wsj.com






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