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On Tuesday, all Dow Jones Industrials stocks signaled for the first time in history to break the 30,000 point mark, going from the 18,000-point underperformance at the worst time of the spring epidemic and successfully achieving a Jedi rebound.
The main factors contributing to the market optimism are the following three aspects: First, after AstraZeneca announced that its vaccine is as effective as 90%, public confidence in the development of the vaccine is generally high. Second, there is news that the US Department of Government Services has officially initiated the Trump-Biden handover, which to some extent eased market concerns about the power transition crisis.
Finally, yesterday the news that Biden will appoint Janet Yellen as Secretary of the Treasury was also very well received by Wall Street. The Yellen itself is quite stable and reliable. The Wall Street Post praised her as “a veteran in helping America recover from the Great Depression.” She is also a supporter of the government’s economic stimulus plan. Also, some Wall Street folks don’t want the new Treasury Secretary to be overly aggressive and cause volatility in the stock market, but rather support and are willing to cooperate with tighter and more regulated oversight.
“The response from the stock market after the US election is really unexpected.” Ryan Detrick, LPL’s chief financial markets strategist, wrote in a report Monday: “The S&P 500 Index rose 8.8% this month. It is expected to be the best November in 40 years. At the same time, stocks in small caps also have a strong trend. The Russell 2000 Index was up 16%, making it the second-best November ever. Although we remain bullish on the stock market for a long time, but there are also signs that already there are some bubbles in market sentiment, which can cause the stock market to pull back in the later stages. “
It appears that small-cap stocks are still gaining momentum and the Russell 2000 Index is expected to create the best record. Some analysts said that in view of the increasing correlation and sensitivity between the Russell index and GDP and changes in the business cycle, this especially indicates that fundamental economic conditions in the United States are improving.
Despite this, the number of confirmed cases of the new crown in the United States continues to rise, and the upcoming Thanksgiving holiday will also be a challenge for epidemic prevention, affecting the future trend of the stock market. Goldman Sachs economic analysts also lowered their expectations for subsequent quarterly GDP. The bank explained that the “recurrence of the epidemic” was the main reason for its consideration. Goldman Sachs now expects annual growth rates of 3.5% and 1.0% in the fourth quarter of 2020 and the first quarter of 2021, respectively (previously forecast 4.5% and 3.5%). “
The epidemic is another reason why some pessimistic investors are bearish on the stock market. James Macdonald, CEO of Hercules Investments, said his company is bracing for the possibility of a stock market crash. Macdonald expects the stock market to fall 20% between December and January 20, marking a significant increase in the number of confirmed cases of the new crown. Continued growth, the uncertainty of the general elections and the transfer, and the difficulty of producing a new round of economic stimulus policies by Congress will be one of the risks of causing turmoil in the stock market.
“Although the Dow 30,000 points is a symbolic moment for the stock market, it is only a continuation of market sentiment before the election. At the close of the day, the Dow 30,000 points is just a number. This milestone cannot be used. Determine the future prospects of the stock market, “wrote MacDonald. (Chinese network of fortune)
Compiler: Chen Yixuan
The Dow Jones Industrial Average crossed the 30,000 threshold for the first time on Tuesday, capping an astonishing run from the depths of the pandemic last spring when the index bottomed just above 18,000.
Investors were optimistic on three fronts. First, optimism about the vaccine flowed Monday with the announcement that a third AstraZeneca candidate was up to 90% effective. Second, the news late Monday that the Government Services Administration, which had been halting the transition from the outgoing Trump Administration to the incoming Biden Administration, would begin its formal handover process, was a relief to those who they feared a protracted transition from … crisis of power.
And finally, yesterday’s news that Biden was about to appoint Janet Yellen as Secretary of the Treasury was also warmly received by Wall Street. Not only is she a steady hand, someone the Washington Post called “a battle-tested leader who helped the nation rebound from the Great Recession,” but she is seen as an advocate for government stimulus. Additionally, some on Wall Street feared that a more progressive election would have shaken the stock market and favored stricter regulation.
Ryan Detrick, chief market strategist at LPL Financial wrote in a note Monday that “The reaction in stocks since the US election has been truly impressive. The S&P 500 Index is up 8.8% on the month, on track to be the best November for the S&P 500 in 40 years. The small cap has also exploded, with the Russell 2000 index rising 16%, which would be the second-best month in its history. While we remain bullish on the long-term in equities, there are some signs that confidence could be improving – a little frothy at the moment, which could increase the odds of a pullback. “
The rise in small-cap stocks has been sizzling, with the Russell 2000 on track for its best month yet. That in particular is a sign, some analysts say, that underlying economic conditions are improving, given the index’s greater sensitivity to changes in GDP and the business cycle.
Still, the surge in COVID cases and the upcoming Thanksgiving holiday are a worrying backdrop for the exuberance in the stock market. In fact, Goldman Sachs economists recently lowered their GDP estimates for that reason. “The bank cited ‘the rapid and widespread resurgence of the coronavirus’ as the main reason it was downgrading its fourth quarter and first quarter GDP forecasts. Goldman now expects annualized growth of + 3.5% and + 1, 0% in the fourth and first quarters (+ 4.5% and + 3.5% previously) “.
That is one of the reasons why some bearish investors are not convinced that we will hold at these levels. James McDonald, chief executive of Hercules Investments in Los Angeles, wrote in a note Tuesday that his firm is bracing for a 20% stock market pullback between now and the inauguration, and that he sees substantial risk in rising COVID-19 cases, electoral uncertainty continues. and the likelihood of insufficient fiscal stimulus from Congress.
“While the Dow 30,000 is a symbolic moment for the stock market, it is simply a continuation of the market euphoria after the pre-election sell-off. At the end of the day, Dow 30,000 is just a number and the milestone has no no credibility in determining near-term stock market prospects, “McDonald writes.
