So Thursday we had all three major US stock indices hit all-time highs. This last occurred at the end of 1999, just before the Internet bubble burst and the Nasdaq lost more than 50% of its value.
Are we on a similar trajectory?
Some signs point to this rally getting long in the tooth.
- Inside trading — executives buying their company’s stock is all time low.
- Equity volume is also at multi-years low even compared to other summer trading volumes.
- Consumer confidence and comfort polls are at multi-years lows.
These levels do not portend to be positive for a further move up in equities.
That does not stop some Wall Street analysts to put out reports that Dow 20K is just around the corner, which is only 1,200 points away from this morning’s opening level.
Where do I see markets in the next 6 months?
The bias is to go higher as the Fed will continue its low-interest rate policy, which allow company’s to cheaply finance stock buybacks. With Bank of England doing QE again and perhaps the Fed starting up a new QE after the election, I would say Dow 20K is baked in for the next 6 months.
The one caveat would be the election. Since this presidential cycle is so beyond any other for comparison, it would be hard to develop a stock plan since so much is up in the air and developments could tip stocks in either direction.
The developments could be, but not limited to:
Hillary Clinton’s legal woes from classified email hack revelations to a probe of the Clinton Foundation. Either of these revelations could throw her campaign into a downward spin.
Donald Trump’s continuing off-the-cuff comments alienating voters and Republican supports could ignite a stronger third-party candidate or having him drop out.
Any of these developments could gyrate stocks in either direction.
So where will equities sit six months from now? I’ll say higher, but not much higher from today’s 18613 level on the Dow Jones industrial average.