Bouncing DOW

The record high for the DOW was 26,616 on 1/16/18 and then it went on the bounce and is currently in the 24,700 range.  The DOW went on a tear from 18,000 in 2016 and it out-ran its headlights and is still bouncing. 

 

This is good news for day traders who buy low and sell high.  The bounce gives them the chance to bag several 1000 point gains.

 

This all happens at the expense of the 401k-holders who buy at whatever the price happens to be at the time these 401k deductions turn into stock, but most don’t care because they get an employer match.

 

But day trading isn’t without its risks. Those who troll for low prices are buying individual company stocks and that requires that you trust their projections.

 

I think healthcare is overpriced and would be leery about owning stock in any healthcare related company. But that doesn’t bother day traders who buy and sell all the way to the edge of the cliff. 

 

Day traders did well when the US dollar was free, but if the Fed raises interest on the money it loans to banks, that will put a crimp in the day trader’s leverage.

 

Corporations will invest in expansion as soon as they can predict rising demand. They will expand in the US if the numbers work out. The corporate tax cut from 35% to 21% gives them some relief to incur the higher costs of operating US facilities.

 

Trump thinks the US should be self-sufficient in strategic resources like steel and aluminum.  We are already self-sufficient in coal and natural gas and are about to be self-sufficient in oil. All of these moves will eventually allow us to reach self-sufficiency in everything. As we become an oil exporter, we will see our trade deficit disappear.

 

Remember, the DOW Average is the average of the stock prices of just 30 large US companies and some of these companies are vulnerable. GE is not dead yet, but it is coughing up blood and is expected to lose its seat on the DOW. 

 

The S&P 500 is the 500 largest US companies. This average is its own animal and is a favorite 401k investment anyhow.

 

I am looking for the DOW to return to the 26,000 level eventually to restore our recent losses. When that happens I will consider that a good run.

 

I established a Vanguard 500 account in 1993 and did well. I reduced my exposure during the Obama years, but never bought gold or silver. I put a lot of it in the house and kept some as a cash reserve.  I kept my Vanguard account and continue to “hold”. The ride from 2016 to 2018 was great.

 

Norb Leahy, Dunwoody GA Tea Party Leader