“The Dow Jones Industrial Average’s ascent to 30,000 Tuesday signals more companies are beginning to participate in the new bull market, offering hope to investors who have long waited for the rally to widen,” WSJ writes.
The Not So Usual Suspects: Apple and Microsoft were “two of the biggest contributors to the blue-chip index’s latest 10,000-point milestone, a journey that took nearly four years.” But November gains from lagging cyclical stocks such as Boeing, Honeywell International and Goldman Sachs powered the Dow over the 30,000-point hump.
Roller Coaster Ride: This all comes after the Dow peaked at 29,551 in February and dropped as low as 18,592 in March, recovering its losses more slowly than its peers partly because it missed out on much of this year’s tech boom.
- Despite trailing the S&P 500 and Nasdaq by a “historic margin,” the Dow is up 5.3% in 2020.
And things continue to look up for the Dow on the heels of positive Covid-19 vaccine news. The progress of Moderna, Pfizer-BioNTech and AstraZeneca-Oxford are “reordering the market’s winners and losers, prompting wagers that the U.S. economy will return to normal more quickly than anticipated.”
- The index is “oriented toward shares of banks and manufacturers that are particularly sensitive to the economy’s trajectory.”
Looking Ahead: Analysts had been skeptical of the recent stock market rally with cyclical sectors stuck on the sidelines until now. It’s hard to see the market continuing to advance solely relying on internet stocks continuing to boom (although cloud computing and remote work are powerful trends). But the “recent Dow rally therefore sends a rosy signal to those who contend that major indexes perform best when the economy is exiting a recession and growth-sensitive companies such as banks lead the way.”
I am reading completely differing opinions about what the stock market will do by “experts.” For example, Morgan Stanley is warning the market looks “ripe for a correction” while Goldman Sachs is predicting a continuation of the bull market.
Please see my Analyst Read from yesterday. I don’t like predicting the stock market, despite having gone “viral” for doing just that. I tend to agree with Howard Marks and believe that we’re in for lower overall returns over the next decade. But if we get multiple vaccines and the economy recovers strongly, I don’t see a reason why the market can’t grind higher, especially since the Fed is not going to be raising interest rates any time soon.