Records on the market: is this the surge we’ve been waiting for? - November 20, 2019

Records on the market: is this the surge we’ve been waiting for?

Not long ago, we wrote about how we expected a year’s end rally on the stock markets. Just days after our blog post, the news came about the record-breaking performance of the most important indices. S&P 500, Dow Jones Industrial Average and Nasdaq Composite all reached record highs.

A week ago, we wrote about how everything points to a year-end rally on the stock markets. We weren’t alone with our prediction, other analysts believed the same (see: Holiday season is coming: what does that mean to investors?  and Others expect a year-end rally like we do). Now it seems that stocks may go even further and break records.

S&P and DJI break records

Last Friday major US stocks reached record highs:

  • S&P 500 closed at $3,120.46.
  • Dow Jones Industrial Average at $28,004.89
  • Nasdaq Composite at $8,540.83.

Not only the numbers were stellar, but S&P 500 for example had its 6th straightly week gain for the first time since 2007. This means that stocks are continuing to have a great year and a Santa Claus rally is more than possible.

Good news was behind it

This rise on the markets came after Larry Kudlow (White House Economic Adviser) announced on Thursday that a trade deal between the US and China may be closer than ever. This seems to make investors more optimistic about the future. There are several opinions in this Business Insider article that support this theory.

Not everyone believes that a quick trade deal is needed for US stocks to remain strong, though. In this MarketWatch article for example it’s noted that US isn’t dependent on trade as much as many believe.

Another fact is that everything has changed in October when the Fed announced its “not QE” program which in fact is recognized by markets as QE (ECB, BOJ and PBOC also pumping liquidity into the markets). So, this liquidity machine will not stop and may well continue to squeeze markets higher toward a massive blow-off topping move. Regardless of future events, the ongoing results are obvious: after launching the new QE, markets are 6 weeks straight up.

Tech and Bill Gates flies

The extraordinary rise of S&P 500 was also fueled by the performance of Microsoft and Alphabet. Both stocks rose more than 1.2% and they both reached record heights. This is important since they are heavily weighted in the index, making their performance rather important.

Microsoft’s rise has another interesting aspect: it made Bill Gates the wealthiest person of the world once again. Him and Jeff Bezos are constantly “fighting” for being the richest, and now it seems that Gates has once again toppled the Amazon founder from the top spot. The rankings may change in the future, but this case again proves how much the wealth of the super-rich is often connected to the companies they have.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.