Dow and S&P Close at New All-Time Highs
The Dow Industrials and the S&P both closed at all-time highs on Monday. Combine this with the fact that the Dow Transports closed at an all-time high as well, with both the Industrials and the Transports jumping triple-digits on the same day to do so, and the stock market has just made a pretty strong statement. The question is, what is the market telling us?
Traditionally, you'd have to say that the highs mean that it's "all-clear" for the next few months - or perhaps even that we could see the economy kick into gear and really take off. Finally.
On the other hand, markets that "top" do so right before they take a tumble.
On the plus side, the economy could very well be hitting its stride, especially given that fact that it's been so sluggish for so long. If it is, it's frankly doing so in a rather quiet, almost secretive sort of way. Yes, new jobs numbers jumped, and the unemployment rate declined, but these are "lagging" indicators, which means they follow the change in the economy rather than lead to a new direction. Besides just about everyone understands that the unemployment rate dropping is more a function of an increasing number of people having given up looking for work, which means they are no longer "counted" as being unemployed. (What are they counted as, by the way?) So whatever is cooking in the economy has yet to exude the sort of luscious aroma you get when there's good stuff going on in the kitchen. If a banquet is being prepared, we remain eager to see and smell what's in store for us.
On the negative side, even as we recognize the highs in stocks, there's no hiding the low dividend yields found in the Dow and the S&P. In fact, the S&P's dividend has slipped below 2, a rate one famous nonagenarian and long-time investment letter writer claims he has never seen. Indeed, Charles Dow - he upon whose work the famous "Dow Theory" is based - claimed that any dividend yield below 3.5% signals danger ahead. Of course, if we take that to heart, stocks have been signalling danger for years.
So I suppose you can play this market a couple of ways: Go for it, in the belief that our long bull trend will continue for the foreseeable future, thereby providing gains you won't want to miss. Or, is not so positively juiced in your belief that the sky's the limit, you simply hope for the best, believing that if you're wrong you'll be able to slip out the back door before the general rush for the exits when the inevitable correction bears down on you.
Or, you could stand aside, or hold a modest position in stocks, ignoring the run-up, put up with the fact that you're not seeing your portfolio jump for joy as the averages break out and bide your time until you have some better idea about what the heck is really going on out there.
You may guess where I stand in all this.
Traditionally, you'd have to say that the highs mean that it's "all-clear" for the next few months - or perhaps even that we could see the economy kick into gear and really take off. Finally.
On the other hand, markets that "top" do so right before they take a tumble.
On the plus side, the economy could very well be hitting its stride, especially given that fact that it's been so sluggish for so long. If it is, it's frankly doing so in a rather quiet, almost secretive sort of way. Yes, new jobs numbers jumped, and the unemployment rate declined, but these are "lagging" indicators, which means they follow the change in the economy rather than lead to a new direction. Besides just about everyone understands that the unemployment rate dropping is more a function of an increasing number of people having given up looking for work, which means they are no longer "counted" as being unemployed. (What are they counted as, by the way?) So whatever is cooking in the economy has yet to exude the sort of luscious aroma you get when there's good stuff going on in the kitchen. If a banquet is being prepared, we remain eager to see and smell what's in store for us.
On the negative side, even as we recognize the highs in stocks, there's no hiding the low dividend yields found in the Dow and the S&P. In fact, the S&P's dividend has slipped below 2, a rate one famous nonagenarian and long-time investment letter writer claims he has never seen. Indeed, Charles Dow - he upon whose work the famous "Dow Theory" is based - claimed that any dividend yield below 3.5% signals danger ahead. Of course, if we take that to heart, stocks have been signalling danger for years.
So I suppose you can play this market a couple of ways: Go for it, in the belief that our long bull trend will continue for the foreseeable future, thereby providing gains you won't want to miss. Or, is not so positively juiced in your belief that the sky's the limit, you simply hope for the best, believing that if you're wrong you'll be able to slip out the back door before the general rush for the exits when the inevitable correction bears down on you.
Or, you could stand aside, or hold a modest position in stocks, ignoring the run-up, put up with the fact that you're not seeing your portfolio jump for joy as the averages break out and bide your time until you have some better idea about what the heck is really going on out there.
You may guess where I stand in all this.
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