Don’t look now, but last week the major indices hit repetitive all-time highs; yes again i.e. repetitive. “Oh it’s going to be one of those types of articles is it Seth”? No! In this article I’m going to do a little bit of recapping the week that was, projecting for the week at hand and entertaining for weak of spirit. “Weak of spirit”? Just go with me on this one.
The major averages were spurred to record levels after the Senate adopted a federal budget for next year, a key step on the road to tax cuts we are to presume or the market rally would have us believe. Some believe the budget bill’s passage, which allows the deficit to rise by $1.5 trillion over the next decade, will help goose the economy, leading to a selloff in Treasury bond prices and a rise in yields. While that may be the initial reaction to yields and as it was found to be last week, one should always recognize the long-term trajectory of bond yields. This trajectory finds itself, much like Volatility, seeking out new low yields over time.
The Dow Jones Industrial Average (DIA) advanced 164 points to 23326, and was up 2.0% for the week. The Nasdaq Composite Index (QQQ) gained 24 points at 6629. The S&P 500 (SPY) was up 13 points to 2575, and 0.9% for the week. Bank stocks were among the biggest beneficiaries of Friday’s market rally, with the Financial Select Sector SPDR (XLF) up 1.2 percent. The ETF has advanced 14.6% year to date. As it pertains to economic data, the calendar was light last week but found some better than expected housing data. In the latest economic data, existing home sales rose 0.7% in September, breaking a three-month losing streak and topping the consensus analyst forecast.
The rally in the broader index, the S&P 500, has been nothing short of spectacular and in some regards significantly unique. The benchmark hasn’t witnessed a single-session drop of 3% or greater in 241 days. This running streak, which is likely to continue this week matches the streak set from January 1995- January 1996. In truth a 3% single-session drop is a rare occurrence, but not experiencing one for this stretch of time is even more rare, which is why I have brought it to your attention. Nothing on the magnitude of natural disasters, geo-political turmoil, threats of military action (N. Korea) or even general market valuations have curbed investor appetite in quite some time. The bull market is some 9 years past the Financial Crisis and beyond the period for which many have called for a market top and subsequent market correction…and yet here we are trending ever higher.
