Dow 16,000!

How is this going to end?

With the Dow hitting milestones and the economy looking like it’s strengthening, investors are partying like it’s 1999. The Senate looks likely to confirm Janet Yellen, a confirmed policy dove. She’ll likely keep the punch-bowl filled and interest rates low, so investors can keep on keeping on.

But every thousand-point climb makes some investors that much more nervous. They remember the euphoria when the Dow first hit 10,000 shortly before the internet bubble burst, and the way it blew through 13,000 and 14,000 in short order, just before the Financial Crisis of 2007. So is 16,000 a signal to sell, or even short the market?

Don’t bet on it. Interest rates are low because the economy is slow. But slow isn’t stopped. We’ve recovered from fears of a double-dip or another financial meltdown; just because the market’s at new highs doesn’t mean it’s about to crash. And even if these levels are irrational, markets can stay irrational for an irrationally long time. These low interest rates mean current and future company earnings are more valuable. And that translates into higher stock prices.

Mr. Market keeps climbing a wall of worry—about the Fed, about earnings, about geopolitics. If you ask him why, he’ll likely respond: “Because it is there.”

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-11-22T09:35:31+00:00 November 22nd, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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