Dow Jones 20k?

a hat with dow jones 20,000 on the front of it

Dow Jones 20,000?

December 27, 2016
The Markets

The Dow Jones Industrial Average (DJIA) got within 13 points of 20,000 last Tuesday. It finished the week about 90 points below the vaunted milestone. As a result, the Dow Jones has gained nearly 10 percent since the end of October, more than double its 4.1 percent rise during the first nine months of the year, spurred in part by Donald J. Trump’s victory in the 2016 U.S. presidential election.

 

The major U.S. indices have been strong performers since early November. Many people are wondering whether they will continue to do well in 2017. The Economist suggested 2017 could hold a surprise that will negatively affect investors’ expectations:

 

“By definition, a surprise is something the consensus does not expect…investors are expecting above-trend economic growth, higher inflation, and stronger profits…So it is not too difficult to see how the first surprise might play out. Expectations for the effectiveness of Mr. Trump’s fiscal policies are extraordinarily high. But it takes time for such policies to be implemented, and they may be diluted by Congress along the way (especially on public spending). Furthermore, it may well be that demography and sluggish productivity make it very hard to push economic growth up to the 3-4 percent hoped for by the new administration.”

Profitability on the rise?

On the other hand, profitability has improved. As a result, american companies have seen earnings rebound, and many companies are positioned to benefit from the corporate tax cuts promised by the new administration. However, this good news may already be reflected in current share prices. Robert Shiller’s cyclically adjusted price-earnings (CAPE) ratio, a measure of valuation based on average inflation-adjusted earnings of companies in the Standard & Poor’s 500 index from the previous 10 years, was at 27.99 on December 23. That’s almost 70 percent above its long-term average of 16.05 and indicates markets may be overvalued.

 

Regardless of potential negative surprises and current market valuation, many analysts expect a positive performance from U.S. stock markets next year. MarketWatch reported, “Most house projections from the big investment banks and brokers converge around the S&P closing the year at 2350 – a scant 5 percent above current levels. Only one strategist…dares to suggest that 2017’s gains could be as much as 20 percent.”

Lets take a look where we’re at:
Data as of 12/23/16 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.2% 6.8% 7.7% 7.4% 12.3% 4.8%
Dow Jones Global ex-U.S. -1.2 0.8 0.4 -3.3 2.8 -1.1
10-year Treasury Note (Yield Only) 2.5 NA 2.3 2.9 2.0 4.6
Gold (per ounce) -2.8 6.5 5.9 -1.9 -6.8 6.1
Bloomberg Commodity Index -2.1 9.8 10.5 -12.2 -9.4 -6.3
DJ Equity All REIT Total Return Index -0.5 7.1 7.3 12.2 11.5 5.1

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

america’s most wanted…

Don’t worry. Robots have not yet replaced human workers. In fact, according to The World In 2017 (published by The Economist):

 

“…automation seems to be pushing people from routine jobs, such as factory work, into non-routine ones, particularly those that require cognitive and social skills. Technological progress will cause a shift in the nature of jobs available and the skills they require. It is impossible to know for sure what these new jobs will be – the Luddites who campaigned against the mechanization of weaving in the early 19th century could not have imagined that new fields such as railways, telegraphy, and electrification were coming. But two tools can help us take a stab at identifying the jobs of the near future: hard-nosed statistics and predictive intuition.”

Statistically speaking..

So, what do statistics tell us about the new jobs young people and career changers should be preparing to do? The U.S. Bureau of Labor Statistics looked at current trends and projected the fastest growing jobs from 2014 to 2024 would be:

 

  1. Wind turbine service technician (up 108 percent)
  2. Occupational therapy assistants (up 43 percent)
  3. Physical therapy assistants (up 41 percent)
  4. Home health aides (up 38 percent)
  5. Commercial drivers (up 37 percent)
  6. Nurse practitioners (up 35 percent)
  7. Physical therapists (up 34 percent)
  8. Statisticians (up 34 percent)
  9. Ambulance drivers (up 33 percent)
  10. Physician assistants (up 30 percent)

 

Predictive intuition suggested quite a different set of careers. The World In 2017 suggested there could be demand for drone technicians and support staff as the use of autonomous vehicles increases. There may also be demand for bot wranglers, such as ‘chatbot’ specialists, who help bots provide customer service through speech and text. Indoor farming may prove to be a growth industry as urban populations increase. Other career possibilities included virtual fashion designers, robo-psychologists, and synthetic tissue engineers. Clearly, there is a world of opportunity.

 

Weekly Focus – Think About It

 

“So, I’m going to challenge all of you. I want you to true your wheels: be honest about the praise that you need to hear. What do you need to hear? Go home to your wife – go ask her, what does she need? Your husband, what does he need? You should go home and ask those questions, and then help the people around you.”

–Dr. Laura Trice, Therapist and life coach

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