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Will the Dow Jones Industrial Average Climb to 30,000?


Nov. 19 2019, Updated 11:15 a.m. ET

The Dow Jones Industrial Average (DJIA) (DIA) seems to be touching new highs despite pessimism related to progress in the trade talks. Earlier in November, China mentioned that both countries agreed to roll back tariffs. However, President Trump denied any rollback.

President Trump’s comment made China pessimistic, according to a CNBC report. China said that it’s closely monitoring developments in the US related to the presidential election and impeachment hearings.

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Which sectors supported Dow Jones?

Despite pessimism in the trade talks, the Dow Jones rose 0.1% to 28,036 on Monday. The consumer staples, real estate, and utility sectors rose on the same day. They’re defensive sectors with high dividend yields. Usually, investors turn towards these sectors during periods of uncertainty.

The sector-specific SPDR ETF shows that the Consumer Staples Select Sector SPDR ETF (XLP) and the Real Estate Select Sector SPDR ETF (XLRE) each rose 0.5%. Also, the Utilities Select Sector SPDR ETF (XLU) rose 0.2%.

Notably, the S&P 500 Index (SPY) (SPX) has risen 0.1% to 3,122, while the Nasdaq 100 rose 0.1%. However, Asian markets have shown a mixed trend today. While Japan’s Nikkei has traded 0.5% down, the Shanghai Composite Index has traded 0.9% up.

Few sectors weighed on the index

The equity market was dragged down by the energy, industrial, and healthcare sectors. The Energy Select Sector SPDR ETF (XLE) fell 1.2% on Monday. Oil prices fell on the same day due to China’s pessimism.

WTI oil prices fell 0.18% on Monday. Crude oil prices have been rising during the current quarter due to progress in the trade talks. So far, the optimism has pumped up energy stocks in the quarter. Usually, cyclical sectors like energy outperform the equity market in an expanding economy.

However, ExxonMobil (XOM) and Chevron (CVX) stock fell 1.0% and 1.7%, respectively, on Monday. Shell (RDS.A) and BP (BP) fell 0.3% and 0.4%.

The Health Care SPDR Select Sector ETF (XLV) and the Industrial SPDR Select Sector ETF (XLI) fell 0.3% and 0.4%, respectively, on Monday.

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Boosters and dampeners

The Dow Jones’s journey to 30,000 seems to be a steep road due to uncertainty surrounding the US-China trade talks. The Dow Jones started its journey from 23,058 this year. So far, the Dow Jones has risen 20% year-to-date. President Trump’s pro-business policies have supported the market.

However, looming trade tension has been the dampener. A few months ago, the equity market became volatile due to escalating trade tension. While China levied tariffs, the US levied counter-tariffs, which raised the tension between the countries. Wall Street has been positive since both sides started talking.

Overall, the talks have been slow due to opposing views. The impeachment hearings are a concern for the market. The impeachment proceedings revolve around allegations that President Trump pressured Ukraine’s leader to provide information on Joe Biden.

Most investors think that the stock market could fall next year if President Trump loses the election. To learn more, read Mark Mobius Warns of a Crash if Trump Loses in 2020.

Will the Dow Jones rise to 30,000?

Besides the boosters and dampeners of the Dow Jones’s path to 30,000, the moving averages show a different story. The Dow Jones’s 50-DMA (day moving average), which is above its 200-DMA, has increased this month, which widens the gap between both moving averages.

The Dow Jones’s 50-DMA is 2.5% above its 200-DMA—compared to 2.0% at the beginning of the month. The level suggests that the markets are technically in positive territory.

Some investors also think that equity markets could rise more. According to a MarketWatch report, MKM Partners’ chief market technician JC O’Hara said, “The melt-up continues. While the market has entered ‘overbought’ territory, we are not seeing any intensity from bears at this moment. While an overbought pullback is always a possibility, we continue to like the intermediate-term prospects for equities.”

According to a CNBC report, the equity market could rise next year based on historical data. The report stated that since 1928, 71% of the time when the S&P 500 Index has risen above 25% in a year, it has moved up by an average of 7% the next year.

The analysis means that since the S&P 500 Index has increased almost 25% so far in 2019, it could continue to rise in 2020. If we apply the same reasoning to the Dow Jones, then it could touch 30,000 in the next year, which shows about a 7% gain from the current level.

While only time will tell whether the Dow Jones touches 30,000, the boosters and dampeners have been making the market volatile.


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