Tag Archives: Dow Jones

Looking for signals: are we living a trend change in Dow Jones?

There have been many comments about the bullish trend in Dow Jones after the election of Donald Trump as US president. The US index reached the maximum 20,000 mark after the Inauguration Day very quickly. The given explanation is that Trump plans and market reaction remembered the first Reagan term in the 1980’s. The current debate is if the bullish trend will keep on or not. There are already pundits that have spoken about a dramatic crash, but in T-Advisor, we prefer to consider figures instead of opinions.

First of all, we have to consider two main points:

  • It is not possible to predict the future.
  • Past performances do not guarantee future ones.

Although they are broadly known, it is useful to remember both, as people take some prospects as immediate reality, but they aren’t.

Let’s look at some technical analysis references in the Dow Jones chart in T-Advisor:

Dow Jones chart in T-Advisor

Technical analysis specialists usually consider that:

  • When two MACD cross from up to down, there is a possibility of negative change of trend. This happened at the beginning of March.
  • When the line crosses a Bollinger Band, investor should look at a repetition of this crossing. If it repeats, there is a possibility of trend change. The first crossing happened some days ago in the lower band.

On the other hand, if we make a bootstrapping analysis of the Dow Jones for the next year, this is the result:

Dow Jones bootstrapping in T-Advisor

The distribution of the possible performance is the following:

Cumulative returns distribution of the Dow Jones for 2017

There is 66% of probability that the Dow Jones close the year with a positive performance. The main result is between -0.4% and 6.4%. Negative results consider 33% of probability from -0.4% and -34%.

Other figures found out in the T-Report of Dow Jones are that the volatility is 9.50%, which is low compared with other indexes and the VaR 1-week is 1.54%, that shows also a low result.

How can we consider these figures? Well, there are some technical signals that might provide the idea that there is a change of trend. The current volatility and VaR shows that the movements are not dramatic in this moment. Finally, the bootstrapping analysis is more biased to a positive result than to a negative one in the next year.

In any case, figures only show probabilities, not certainties. In a short-term vision, following the day-to-day signals is relevant. In our long-term perspective, the relevance of this analysis is relative to the moment in which the investor thinks to rebalance his or her portfolio or decide to change the assets he or she invests in.

What will Donald Trump bring to the markets?

It happened. Nobody expected (really) that an outsider as Donald Trump could win the election for the presidency against the candidate of the establishment, Hillary Clinton. But Trump will swear his charge as the 45th president of the USA in Washington next January. What will he bring to the markets?

The first reaction but all except negative. S&P 500 and Dow Jones went up in the following days after the election. The rise has been around 2% in this period.

S&P 500 chart in T-Advisor

S&P 500 chart in T-Advisor

Dow Jones chart in T-Advisor

Dow Jones chart in T-Advisor

Trump has campaigned for an expansive economic model. He underlined this idea in the address after the victory, because he insisted in rebuilding infrastructures. Maybe, markets have chosen to look the positive part of the Trump proposals, as NY Times comments. The positive reaction was not only in equities, but also in bonds. The position commented in Black Rock put the accent in the possible reflation if new administration confirms the Trump programme.

The effects were not so nice in other world regions. For instance, Latam received a hit and the markets (above all, Argentina and Brazil) dropped dramatically. The worst result was in the Mexican market, with a loss of 6.7% in the last 7 days. There are fears about the next decisions related to Mexico and Latam from USA, above all what refers to immigration and free trade.

Mexico IPC chart in T-Advisor

Mexico IPC chart in T-Advisor

We are not trying to predict the future. Markets usually have their own way to welcome a president. In this case, the result was positive, but it does not mean that there will be a bubble, as some say, or it will be the next crash. For sure, there will be several changes compared with the Obama Administration. Trump has also the support of the US Congress, as Republicans have the majority in both houses and this can push their economic decisions. We will comment next year to contrast the initial perceptions and the reality.

USA: economic uncertainties in an election year

The American economy has shown how an open economy can perform the best and the worst. In the years of the beginning of the crisis, there was a huge drop in all indicators. The GDP fell an 8% in a quarter in 2009, but at the end of the same year, it grew around 4%. However, the evolution shows a great instability and the forecast are also similar, with a perspective of 2-3% GDP growth for this and next year.

US GDP evolution in the last years

The past market turmoil was also dangerous for investors. Under these circumstances, the Federal Reserve chose a wait-and-see strategy. Finally, in its last meeting, the institution pointed out two rate hikes instead of four, as it mentioned in December. Investments and exports remain soft and a rate hike could make dollar more expensive, which would not be positive for future developments.

These uncertainties happen in a presidential election year. Caucuses and primary elections show the following stage: Democrats fight is between the moderate Hillary Clinton and the liberal (in an American meaning, which in Europe would be social-democrat) Sanders; on the other side, Republicans are divided between the millionaire Donald Trump and the senator Ted Cruz. Clinton and Trump, respectively, have the advantage. The difference is that the Republican Party does not support Trump. Let’s see the evolution of this situation, even more when The Economist listed a possible Trump victory as one of the 10 main global risks.

What is happening in the American markets? If we take into account the S&P 500 as one of the main references, there was a steady grow till last year, when market uncertainties were back with the Chinese crisis and how it could affect US, apart from the drop of the oil price.

T-Advisor chart: S&P 500 evolution in the last 5 years

T-Advisor global trend evolution also shows this weakness in the last year:

T-Advisor chart: USA global trend evolution

The investing landscape is not clear, but several experts are optimistic about a positive evolution of S&P this year, with a closing better than in the beginning of the year. For instance, Oppenheimer is the most optimistic and bets that the reference index will close 2016 around 2,300 points.

In the case of the Dow Jones, these are the companies with the best performance in the last year:

Best performance assets in Dow Jones

On the contrary, these are the worst:

Worst performance assets in Dow Jones

It is notorious how technology is not a sure bet, as Microsoft is on the top, but IBM is amongst the worst-performance companies, just to mention two very well-known brands.

To sum up, politics will influence this year in America, but the economic machine works very independent from them. The Fed actions, the evolution of the oil price and the dollar, as the Asian evolution will have more effects surely than the possible Trump-Clinton election.

T-Advisor ranking: the best in Q1

How was the first quarter of the year for your investments? T-Advisor publishes its ranking with the best stocks in the main world indexes taking into account its score. T-Advisor score is a specific tool developed by our company. It is calculated combining several ratios, mainly performance and risks.

New York Dow Jones Industrial Average has the following best stocks ranked by our score:

Score

Perf. Q1

Volatility

VaR day

VaR week

Walt Disney

9.4

6.76%

18.17%

-1.84%

-3.11%

Du Pont de Nemours

8.85

4.29%

17.07%

-1.85%

-3.52%

Unitedhealth

8.6

8.68%

19.54%

-1.96%

-5.07%

American Express

8.3

0.48%

18.51%

-1.97%

-4.95%

Microsoft

8.26

10.71%

26.28%

-2.13%

-5.45%

The ranking shows the richness of the American economy: there are companies from very different branches, as cinema, technology, health, finances or chemicals.

FTSE 100 in London has the following best stocks ranked by our score:

Score

Perf. Q1

Volatility

VaR day

VaR week

Weir Group

9.81

17.57%

25.55%

-2.77%

-4.34%

Bunzl

9.76

10.77%

14.16%

-1.34%

-2.30%

Kingfisher

9.73

11.80%

22.44%

-1.92%

-4.35%

Whitbread

9.65

12.87%

19.21%

-2.08%

-3.30%

Next

9.22

22.56%

16.81%

-1.54%

-2.22%

Surprisingly, the best scores in London are linked to companies from retail, consumer and essential supplies.

DAX 30 in Germany has the following best stocks ranked by our score:

Score

Perf. Q1

Volatility

VaR day

VaR week

Infineon Technology

9.87

13.71%

27.19%

-2.65%

-6.11%

BMW

9.63

8.06%

25.70%

-1.93%

-5.26%

Continental

9.22

10.79%

23.87%

-2.32%

-6.20%

Lanxess

8.75

14.03%

31.61%

-2.96%

-8.27%

Daimler AG

8.22

10.89%

27.41%

-2.30%

-5.88%

German technology, chemicals and car branches are at the top of our ranking.

IBEX 35 in Spain has the following best stocks ranked by our score:

Score

Perf. Q1

Volatility

VaR day

VaR week

Jazztel

10

41.85%

22.22%

-2.05%

-3.72%

Grifols

8.66

15.80%

22.24%

-2.32%

-4.90%

Grupo Ferrovial

8.62

12.94%

19.71%

-1.65%

-5.16%

Bankinter

8.31

19.33%

33.46%

-3.44%

-7.30%

Red Eléctrica

8.14

21.87%

23.32%

-1.74%

-4.52%

In Spain, Jazztel is at the very top profiting the consolidation in the telecommunication branch in this country. The performance of this share anticipates a possible merge with other company.