Stocks zoom beyond 22,000

August 03, 2017

Keywords: Investment Consulting

The Dow Jones Industrial average reached a fresh high on Wednesday, further establishing 2017 as a year investors - and stock market observers in general - won't soon forget.

Approximately four months after surpassing the 21,000 mile marker, the Dow hit and exceeded 22,000 on Aug. 2, finishing the trading day at 22,016.24, up approximately 52 points from 24 hours earlier. It was the sixth straight period in which the Dow closed at an all-time high, fueled by another strong earnings period among several major multinational conglomerates.

If the year thus far has been anything on Wall Street, it might best be described as "record setting. It was the 32nd time that the Dow hit an unprecedented peak, two quarters of the way through 2017 and its value is now 20 percent higher compared to November. According to The Wall Street Journal, Aug. 2 marked the fourth thousand-point milestone for the blue-chip index since Americans went to their local polling places on Nov. 8.

Volatility gone AWOL
Typically, stock values rise and fall with relative consistency, but volatility has been largely absent on Wall Street, now two-thirds of the way through 2017. Indeed, as noted by the American Association of Investors' Charles Rotblut, the Chicago Board Options Exchange's Volatility Index, or VIX, has repeatedly closed lower than 10 for much of the year, ending a 10-day streak of sub-10 finishes on July 28. Prior to last Friday, the VIX had dipped lower than 10 on only 16 separate occasions tracing back to 1990.

"To reiterate, over its first 27.5 years, there have only been 16 days with a closing value for the VIX of less than 10," Rotblut emphasized.

The VIX tracks the volatility of stock values for the Standard and Poor's 500, another index which has seen more highs than lows this year. On Aug. 2, the S&P 500 tacked on 1.22 points, climbing to 2,477.57, up 0.05 percent compared to 24 hours earlier.

Neil Wilson, a senior market analyst out of London, told Reuters that it should be interesting what happens on Wall Street among major indexes in August, which historically has not been the best of months for price growth.

"So there is caution about how long this can be sustained beyond earnings season euphoria," Wilson added.

Pessimism in the cellar
While some investors are worried about when a course correction will come to fruition, pessimism hasn't been this low all year. Just 24 percent of respondents in a recent AAII survey said they suspected stock prices would slide over the next six months. That's the lowest rate of bearish sentiment since last November.

At the same time, though, investors aren't overly optimistic that stock prices will go higher either, seemingly of the mind that values have finally reached their peak. Forty-one percent of respondents anticipate stock prices remaining virtually unchanged come this time in January 2018, according to the AAII poll. It marks the 18th instance in the previous 19 weeks that neutral sentiment has been above 31 percent, the historical average.

Even though the stock market has seen more highs than lows for much of the year, it's important to remember that valuations can tumble literally overnight. At Miles Capital, we provide our clients with sound investment consulting advice though portfolio diversification, giving investors the breathing room they need to breath easy during and after stock market whimsy.


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