The Dow Jones Industrial Average hit a big, round number on Tuesday, surpassing 30,000 for the first time ever.
The surge came after the Trump administration initiated the transition process for President-elect Joe Biden, and after Biden named former Federal Reserve Chair Janet Yellen as his pick for Treasury Secretary, as well as a slew of other cabinet picks.
Yellen is seen as a market-friendly pick after overseeing the Fed during a long economic expansion with historically low interest rates, and is likely to push for more economic stimulus.
While the index closed below the 30,000 milestone on Wednesday, Oppenheimer Asset Management’s John Stoltzfus believes the Dow’s new all-time high is justified and could be the beginning of move higher.
“Very simply, the fundamentals are improving and prospects for them to improve further appear likely,” Stoltzfus said.
The firm’s chief investment strategist believes vaccine advancements, less uncertainty surrounding Washington’s post-election makeup, and better than expected third quarter earnings will propel the market higher.
Stoltzfus also believes any near-term profit taking will be kept to a minimum, even if Georgia’s January 5 Senate run-off race ends with a unified government.
“At that point, you might s a pullback in the area of 6% to 10%,” Stoltzfus said. “But it would be recoverable by fiscal policy.”
Scott Redler, partner with T3Live.com, believes the record-breaking number could get draw some investors from the sidelines, propelling the Dow’s next leg higher.
“I feel like ever time we get to a big milestone, people ask, ‘why aren’t I in the stock market,?’” Redler said. “At this point, it feels like this is not going to be a ‘sell the milestone.’”
And while tech stocks have been driving the market higher, Credit Suisse chief U.S. equities strategist Jonathan Golub says investors have recently been loading up on cyclical stocks, including industrials, materials, energy, and financials, all sectors that will continue to do well as the economy recovers.
“I think that there’s been a real shift in the last several weeks where investors are much more excited about cyclical companies that are really plays on reopening of the economy, given the success of the vaccines,” Golub said. However, Golub said investors “could ultimately see a reversion back to the growth stocks that have been driving a lot of the success because they’ve been driving a lot of the earnings.”
As for what other sectors could drive the Dow closer to 40,000, Golub said “there are two sectors that have not participated in the upside over the last six months that are likely to do well in 2021. They are financials and health care. They are the two least expensive groups relative to the way they normally trade in the market.”