After the Dow spent two days above the 21,000-point threshold, analysts are speculating on how much fuel the market has left in the tank.
The Dow Jones industrial average didn't give up much ground Thursday after eclipsing the 21,000-point threshold for the first time a day prior, but the index did finish down slightly after starting the day with a record open.
The Dow closed the day less than 3 points north of the 21,000-point benchmark, down nearly 113 points from Wednesday's close. The Standard & Poor's 500 and the Nasdaq composite indexes also spent most of the day in negative territory before ending in the red.
But Thursday's market performance wasn't a giveback so much as it was a pause during what has otherwise been an exceptionally prosperous time for investors. The Dow's race from 20,000 to 21,000 took only 24 trading days, tying a record from the 1990s for the fastest 1,000-point jump the index has ever seen.
"Of course, in terms of percentage moves, the move in 1999 was much larger – nonetheless, this only reinforces how strong the rally has been since the election," Ryan Detrick, a senior market strategist at LPL Financial, said in a statement Wednesday.
To his point, the Dow closed Thursday up more than 14.5 percent from where it sat on election night, when President Donald Trump emerged victorious and his agenda of deregulation and lower taxes jump-started the market.
Trump himself seems to have taken the rally to be an endorsement of his position in the White House, tweeting about the massive gains Thursday and highlighting in a speech Tuesday before a joint session of Congress that "the stock market has gained almost $3 trillion in value since the election on Nov. 8 – a record."
But when it comes to the market's future performance, it's worth noting that some investors have suggested underlying economic fundamentals don't necessarily support the seismic gains seen of late on Wall Street.
Jeffrey Saut, chief investment strategist at financial services outfit Raymond James, wrote in a note to clients Thursday that he and his colleagues "do not understand what is going on."
"Folks, I have been in this business for over 46 years, and observing markets with my father for 54 years, and I have never experienced anything like what is currently happening," Saut said.
Josh Wright, chief economist at software company iCIMS, delivered a similar message in a research note Thursday, saying the U.S. is "witnessing a divergence between very strong sentiment indicators and only moderately strong hard economic data, corresponding to the current gap between expectations for and the reality of the Trump administration."
"That's not a dig – it takes time or a new administration to pursue its policy agendas and then for those policies to have an effect," Wright said.
Trump rode into Washington promising lower corporate and personal taxes, a reduced regulatory burden, job growth and substantial infrastructure investment. A little more than a month into his term, he has thus far taken aim at government regulations through executive actions and claimed his election influenced multiple corporate employment decisions.
Tax reform and infrastructure improvements have been left waiting in the wings – something not all that unexpected given the congressional buy-in and funding considerations involved.
Still, Wright noted Thursday that investors eventually may need to see some progress to keep this market rally going. Money has been pouring into the stocks of infrastructure and banking companies, which are widely expected to boom under Trump if his economic agenda goes according to plan.
"In order to keep pushing stocks and sentiment higher, which parts of the Trump/Republican agenda do investors need to see enacted (or shot down, as the case may be) and by when do they need to see this?" Wright asked. He suggested investors' patience would likely last "more than a quarter but less than a year."
Detrick pointed out, though, that at least some of the rally has been driven by "improving earnings" and "real economic improvement." Key facets of that improvement: The labor market is in the midst of a record-breaking run for job creation, unemployment is low, the Federal Reserve appears ready to raise interest rates and wage gains have begun to pick up steam.
Consumer confidence indicators rising to pre-recessionary highs also bode well for the market. As Brad McMillan – chief investment officer at Commonwealth Financial Network – wrote in a research note Wednesday, "Changes in consumer confidence track very closely with changes in stock market valuations."
"With consumer confidence spiking recently, a rise in valuations is both reasonable and likely to continue until confidence rolls over," he said. "In the short run, there's no reason markets can't keep going, and we should enjoy the ride."
Even Saut, who admitted to being perplexed by investors' exceedingly optimistic sentiment, noted Thursday there could be "years left to run" in the current bull market.
Yet while post-election optimism supported by sound economic fundamentals continues to drive markets along, if Trump doesn't deliver on his promises – or if an unforeseen roadblock presents itself – that sunny sentiment could dry up in a hurry.
"Very high valuation levels have historically led to high levels of risk once the exuberance subsides," McMillan said. "The faster and higher we go … the more damaging any pullback could be. Keep that in mind as you celebrate the new records."
The Dow Jones industrial average didn't give up much ground Thursday after eclipsing the 21,000-point threshold for the first time a day prior, but the index did finish down slightly after starting the day with a record open.
The Dow closed the day less than 3 points north of the 21,000-point benchmark, down nearly 113 points from Wednesday's close. The Standard & Poor's 500 and the Nasdaq composite indexes also spent most of the day in negative territory before ending in the red.
But Thursday's market performance wasn't a giveback so much as it was a pause during what has otherwise been an exceptionally prosperous time for investors. The Dow's race from 20,000 to 21,000 took only 24 trading days, tying a record from the 1990s for the fastest 1,000-point jump the index has ever seen.
"Of course, in terms of percentage moves, the move in 1999 was much larger – nonetheless, this only reinforces how strong the rally has been since the election," Ryan Detrick, a senior market strategist at LPL Financial, said in a statement Wednesday.
To his point, the Dow closed Thursday up more than 14.5 percent from where it sat on election night, when President Donald Trump emerged victorious and his agenda of deregulation and lower taxes jump-started the market.
Trump himself seems to have taken the rally to be an endorsement of his position in the White House, tweeting about the massive gains Thursday and highlighting in a speech Tuesday before a joint session of Congress that "the stock market has gained almost $3 trillion in value since the election on Nov. 8 – a record."
But when it comes to the market's future performance, it's worth noting that some investors have suggested underlying economic fundamentals don't necessarily support the seismic gains seen of late on Wall Street.
Jeffrey Saut, chief investment strategist at financial services outfit Raymond James, wrote in a note to clients Thursday that he and his colleagues "do not understand what is going on."
"Folks, I have been in this business for over 46 years, and observing markets with my father for 54 years, and I have never experienced anything like what is currently happening," Saut said.
Josh Wright, chief economist at software company iCIMS, delivered a similar message in a research note Thursday, saying the U.S. is "witnessing a divergence between very strong sentiment indicators and only moderately strong hard economic data, corresponding to the current gap between expectations for and the reality of the Trump administration."
"That's not a dig – it takes time or a new administration to pursue its policy agendas and then for those policies to have an effect," Wright said.
Trump rode into Washington promising lower corporate and personal taxes, a reduced regulatory burden, job growth and substantial infrastructure investment. A little more than a month into his term, he has thus far taken aim at government regulations through executive actions and claimed his election influenced multiple corporate employment decisions.
Tax reform and infrastructure improvements have been left waiting in the wings – something not all that unexpected given the congressional buy-in and funding considerations involved.
Still, Wright noted Thursday that investors eventually may need to see some progress to keep this market rally going. Money has been pouring into the stocks of infrastructure and banking companies, which are widely expected to boom under Trump if his economic agenda goes according to plan.
"In order to keep pushing stocks and sentiment higher, which parts of the Trump/Republican agenda do investors need to see enacted (or shot down, as the case may be) and by when do they need to see this?" Wright asked. He suggested investors' patience would likely last "more than a quarter but less than a year."
Detrick pointed out, though, that at least some of the rally has been driven by "improving earnings" and "real economic improvement." Key facets of that improvement: The labor market is in the midst of a record-breaking run for job creation, unemployment is low, the Federal Reserve appears ready to raise interest rates and wage gains have begun to pick up steam.
Consumer confidence indicators rising to pre-recessionary highs also bode well for the market. As Brad McMillan – chief investment officer at Commonwealth Financial Network – wrote in a research note Wednesday, "Changes in consumer confidence track very closely with changes in stock market valuations."
"With consumer confidence spiking recently, a rise in valuations is both reasonable and likely to continue until confidence rolls over," he said. "In the short run, there's no reason markets can't keep going, and we should enjoy the ride."
Even Saut, who admitted to being perplexed by investors' exceedingly optimistic sentiment, noted Thursday there could be "years left to run" in the current bull market.
Yet while post-election optimism supported by sound economic fundamentals continues to drive markets along, if Trump doesn't deliver on his promises – or if an unforeseen roadblock presents itself – that sunny sentiment could dry up in a hurry.
"Very high valuation levels have historically led to high levels of risk once the exuberance subsides," McMillan said. "The faster and higher we go … the more damaging any pullback could be. Keep that in mind as you celebrate the new records."
