The Dow: Sustainable? Or Setting Itself Up For Failure?

The Dow Experiencing Longest Winning Streak Since 1999

Is The Dow SustainableAs of today, the Dow has been on a roll with an 8 day in a row winning “streak” as prices continue to climb.  The question on everyone’s mind today is, will it continue to go higher?  Or will it eventually peak out, returning back to mean.  8-day streaks are rare in the stock market, but have occurred in the past, and usually happen early on in the year.  The last time the Dow experienced an 8 day winning streak was Jan. 31, 2011.

Is The Current Dow Streak Sustainable?

What’s very unique about the current DOW streak is that every single day the Dow is making new highs, and strangely enough, other major indexes aren’t keeping pace.  The S&P 500 is still 0.8% below making a new record high and the Wilshire 5000 Total Market Index fell by 0.2% yesterday.

Is The Fed Supporting The Dow’s Current Winning Streak?

Most economists feel that the Dow is being propped up by the Fed’s current stimulus programs.  Meaning that when the stimulus is removed from the economy, the catalyst for the Dow will also be removed.  It will be interesting to see how things progress with the back-and-forth banter within the Federal Reserve regarding monetary policy.

Should I Jump On The Dow Bandwagon?

It’s easy to get caught up in the market frenzy, but it’s also very important to ask yourself what’s normal for the Dow?  And how long can it sustain these record high numbers?  All things return to average at some point in time.  It’s a process known as “mean reversion”.  As Joseph Saluzi commented in a recent USA today article “It keeps going up until it doesn’t.”  When you choose to invest in the Dow or any other index, make sure you’re on the “going up” side, not catching the boat on its way back down.  F

For more information on the best investment picks for today, or to hear more regarding the markets, speak to a Redhawk Financial Advisor near you today.

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