The Dow Jones Industrial Average sailed past the 25,000-mark for the first time on Thursday, while other major indexes rose to new highs after a strong private jobs report added to a bullish sentiment from indications of robust growth in major economies. Newslook
The Dow jumped 221 points Friday, capping off its best four-day start to a year since 2003 and continuing a record-breaking run highlighted this week when it topped 25,000 for the first time.
Investors are aggressively buying stocks at the start of 2018. Optimism on Wall Street is being driven by a belief that a massive corporate tax cut will boost economic growth and help U.S. companies make more money.
For now, stock investors see nothing that could derail the rally, not even the controversy surrounding a new book highly critical of President Trump.
“No Trump controversy seems to affect the markets,” says Greg Valliere, chief global strategist at Horizon Investments. “Only three things could sink this market: a huge geopolitical crisis, a recession, or a major spike in interest rates. None of these things seems likely.”
The Dow Jones industrial average, a 30-stock index that includes Apple, Walt Disney and IBM, has rallied nearly 577 points, or 2.3%, this year. Its biggest gainer in 2018 is General Electric, which was the Dow’s worst performer last year. GE has gained 6.25% after a nearly 45% fall in 2017.
Friday’s close of 25,295.87 was the Dow’s third record close of 2018 — following a record 71 all-time highs last year when it gained 25.1%.
However, the recent straight-up trajectory of the Dow and the rest of the U.S. stock market has some Wall Street pros getting nervous.
Too much investor exuberance is seen as a potential negative, as market’s tend to top when optimism is at elevated levels.
“Investors are starting to feel a little too overconfident for my liking,” says Jamie Cox, managing partner for Harris Financial Group.
Still, even Cox can’t deny that improving business conditions in the U.S. and overseas, coupled with the benefit of tax cuts is a formula for higher stock prices.
“The tax law has psychologically boosted the morale of investors and their opinions on markets,” Cox says.
Cox sees the stock rally continuing until an inflation scare or a sharp increase in interest rates from the Federal Reserve snuffs out investor optimism.
“I expect a very strong 2018 with worry seeping in around November as inflation data starts to suggest it’s no longer hibernating,” he said.
Investors are now focusing mainly on policies out of Washington that they deem as market-friendly, says Sam Stovall, chief investment strategist at CFRA, a New York-based investment research firm.
“Investors have been encouraged by the pro-business platform promoted by the Republicans, consisting of a reduction in regulation, tax cuts, and the potential for infrastructure spending,” Stovall told USA TODAY.