Dow Gains 718 Points, but Divisions Run Deep

Photography by Patrick T. Fallon/Bloomberg

There are two sides to every story—and that should be making investors uncomfortable right about now.

Yes, the market had a very good week. The Dow Jones Industrial Average gained 718.47 points, or 2.8%, to 25,989.30, while the S&P 500 rose 2.1% to 2781.01. The Nasdaq Composite advanced 0.7% to 7406.90. It was the Nasdaq’s first two-week winning streak since August.

The midterm elections presented dueling narratives of what the U.S. could and should be, and the relief when they were over was credited for the Dow’s 545-point rise on Wednesday. That gain, however, should not be seen as an endorsement of one side or the other. “The market is not a Democrat or Republican,” says David Donabedian, chief investment officer at CIBC Private Wealth Group. “You have to leave political biases aside.”

What should we be taking our cues from, if not politics? How about the Federal Reserve? It shocked no one with its statement on Thursday, which left it on track to raise rates again in December.

“While the FOMC basically said little new, it was that silence that also sent a message,” explains Peter Boockvar, chief investment officer at Bleakley Advisory Group. “It was that nothing that happened in the month of October, both market-wise and in the data, has altered their stance, and thus was an implicit confirmation of what the market has priced in for December—another rate hike.”

Trade is the other issue keeping the market stuck in place—and it’s the trickier of the two. Bank of America Merrill Lynch strategist James Barty argues that if a deal between the U.S. and China can be reached at the G20 meeting this month—even just an agreement not to

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