Dow Hits Lifetime High

trading-floor

The Dow Jones Industrial Average DJIA, +0.20%  climbed 39.58 points, or 0.2%, to close at 19,796.43, after setting an intraday record of 19,824.59, led higher by shares of Johnson & Johnson Inc. JNJ, -0.01%  and Wal-Mart Stores Inc.WMT, -0.10%  Monday marks the sixth consecutive record close for the average. 

The DJIA climbed to 19,824.59, the highest intraday DJIA to-date, before settling in at the also record-high of 19,796.43. However, the DJIA gains were accompanied by S&P and Nasdaq falling. The stock market will continue to see substantial volatility, here are some key reasons why:

  • In the wake of Trump’s victory, equity markets have been bullish. Investors are predicting swift economic growth, banking on financial & environmental deregulation along with substantial corporate tax cuts. However, many analysts are saying that the writing is on the wall for Trump’s eventual screw-up (there are no shortage of these prognostications and they make fair points, example: http://www.marketwatch.com/story/is-stock-market-trumpophoria-running-out-of-room-2016-12-12).
  • There is a market-wide restraint to continue gains as the world waits for the FOMC to finish its two-day meeting on Wednesday, 12/14. The Fed is expected to only raise the federal funds rate by 25 basis points, which should not impact the market too significantly. However, if the increase does not happen or the rate hike is larger, who knows.
  • OPEC and many non-OPEC nations have agreed to curtail supply of crude oil by 558,000 barrels/day. Effectively, limiting demand to drive up the price. Countries that rely on this slightly important resource have been getting hammered recently (Russia, Saudi Arabia, Venezuela, etc.) with the lower price. Get ready for some pain at the pump, although the ability of OPEC to enforce the deal is in question. OPEC nations are not known for their transparency, keep an eye on how this story develops.
    • Note: Rex Tillerson, ExxonMobil CEO, has been nominated as Secretary of State by Donald Trump. Gun-to-my-head, this guy may play a little favoritism with bug oil. Allocate accordingly.

 

Source: http://www.marketwatch.com/story/dow-20000-within-sight-but-caution-over-fed-wont-make-it-easy-2016-12-12


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