WSJ: Market’s Rise is Only Getting Started

Image of blue arrow pointing upThe SPDR Dow Jones Industrial Average ETF (NYSE:DIA) just hit all-time highs, and if a recent Wall Street Journal report proves prescient, the market’s gains this year are just the beginning of a much larger bullish move.

Factors for the continued gains include all major indexes melting up at once, and a lack of other options for investors to put their money into. From the WSJ:

A troika of stock indexes hit records in tandem for the first time since 1999. The question is whether the party is just getting started.

On Thursday, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all rose to highs on the same day, an alignment that hasn’t occurred since Dec. 31, 1999. The records punctuate a march that defies stocks’ sharp downdraft at the year’s start. The ratio of stocks that trade on the New York Stock Exchange and the Nasdaq hitting 52-week highs versus 52-week lows recently surged to its highest level in years.

“The last time we’ve seen levels like this consistently was in 2013, which went on to be one of the best years for stocks,” said Frank Cappelleri, executive director of institutional equities at Instinet LLC. In 2013, the S&P 500 rose 30%.

Along with the fact that gains tend to beget more gains, there are seasonal factors at play that could lead to much more buying next month.

For some traders, the trends suggest stocks could enjoy a sudden surge. The bump could happen once investors return from summer vacations and begin taking some cash off the sidelines, they say. U.S. stock-trading volumes have been below the 2016 average in recent weeks.

The consensus one-year target for the Dow Jones Industrial Average is now more than 20000 as of Tuesday, up from around 18860 in February just before stocks hit a 2016 low, according to S&P Dow Jones Indices.

That 20,000 target for the DJIA suggests a 7.6% gain from the Dow’s recent trading levels.

A so-called “melt-up” is also possible over the next year, where stocks simply rally for rallying’s sake. We’ve seen many such rallies of this type amid the current ultra-low interest rate environment. That’s because fixed income investments simply aren’t providing attractive enough yields to lure in investor dollars. Those dollars then head for riskier assets like stocks instead.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.32 (-0.17%) to $185.98 per share in Friday morning trading. The largest ETF that tracks the benchmark Dow Jones index has gained about 7% year-to-date.

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