On Friday, November 15th the Dow closed above 28,000 for the very first time. This is the breakout we have been waiting for. From January 2018 until late October of this year the market moved sideways and made no progress. Five times since January of 2018 the Dow approached the 27,000 mark but was unable to decisively break through until the end of October.
The breakout came on October 31st with monthly closing highs on the S&P 500, the Dow, the global markets and the Nasdaq all well above the previous range. Many industry sectors as well as individual stocks have logged new monthly highs. There is breadth to the rally which is affirming as more and more stocks and industry sectors are participating, and not just in US markets, but around the world. Globally stocks are making new highs for the first time in years.
The rally in November is powered by strong corporate earnings and a roaring economy. In spite of great economic numbers, there is talk of recession. Consumer sentiment has been at odds with the economy. Many individual investors have left stocks in exchange for money market funds convinced a recession is right around the corner.
I can’t explain the gloom and doom in light of the positives we are seeing. Some people say it is just time for a recession and a bear market. We haven’t had a recession in ten years, so it must be time. Others are having a hard time admitting that the economy is strong. There will be another recession in the future because that is how a free market economy works. But it doesn’t appear to be imminent based on the current data. Sometimes a contrarian view can pay off.
A healthy change will be for the previous ceiling at 27,000 on the Dow to become the new floor. We don’t predict the future, but it is obvious that after a lengthy consolidation, the market is moving higher. When everyone else sees gloom and doom, if the market is in a positive trend, follow the market and not the sentiment of the day.