Markets Close at All-Time Highs, Again

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The S&P 500, Nasdaq, and Dow Jones Industrial Average indices all closed at record highs last week to mark yet another unbelievable positive week for stocks.

Since the start of 2018, Emini S&P 500 futures, considered the benchmark gauge for the overall stock market in the US, have only finished in the red on two days, both of which were minimal. This marks the best start of new year in the history of the stock market.

Unbelievable Emini S&P 500 Futures Rally

Emini S&P 500 Rally 2018

As of Friday, January 26th 2018, front-month Emini S&P futures were up 7.42% for the year. Nasdaq 100 futures have been outperforming almost every other asset this year with an unbelievable YTD gain of nearly 10%. Currently, Nasdaq futures are in the number three spot for YTD gains with only oats and lumber in the number one and two spots, respectively.

List of YTD Futures Market Leaders as of 12/28/18

Oats (Mar ’18)
+10.37% 
Lumber (Mar ’18)
+10.27%
Nasdaq 100 E-Mini (Mar ’18)
+9.70%
Orange Juice (Mar ’18)
+9.46%
Crude Oil WTI (Mar ’18)
+9.43%
Natural Gas (Mar ’18)
+9.26%
Platinum (Apr ’18)
+8.54%
Dow Indu 30 E-Mini (Mar ’18)
+7.56%
S&P 500 E-Mini (Mar ’18)
+7.42%
Mexican Peso (Mar ’18)
+6.91%
Gasoline RBOB (Mar ’18)
+6.23%

As of Sunday evening, all three major US futures indices were among the top 10 assets in terms of YTD percentage gain.

The Melt-Up is Real

As the overall market continues to climb, more and more investors are evidently hopping on the bandwagon and buying stocks. FOMO, or the fear of missing out, is indubitably contributing to 2018’s unprecedented equity rally.

Moreover, the US dollar slumped to a three-year low last week, which also contributed to stock market gains. As a general rule of thumb, when the US dollar declines, US stocks and commodities literally become cheaper for foreign investors to purchase. As such, it’s typical to see an influx purchases from overseas investors which tends to have a positive effect of US stock prices.

Brad McMillan, chief investment officer for Commonwealth Financial Network stated, “I think a lot of it is the dollar. When you look at the dollar weakening as it has that is going to have a positive effect.”

Strong Earnings Push Stocks Higher

Bullish earnings reports also had a positive effect on stock prices. According to FactSet,  roughly 77% of the companies in the S&P 500 that have reported earnings thus far have beat estimates. As tax cuts and deregulation start to take boost investor confidence and prove to be a boon for the overall economy, American are subsequently becoming more profitable.

Cryptocurrency

CBOE XBT bitcoin futures continued to hover beneath the key psychological level of $12,000. Overall bitcoin has rebounded from $9,250 on January 16th over fears of a crackdown in South Korea. This is not the first time bitcoin has sold off over news of a country-wide ban.

We mentioned how a similar pattern of a bitcoin selloff emerged in 2016 and set the foundation for an epic rally in 2017. As more investors begin to trade bitcoin futures, and as institutions finally develop bitcoin ETFs, more investors will be able to synthetically purchase the cryptocurrency, which could arguably have a favorable effect on the price.

Crude Oil

In terms of commodities, energy continued to show unbelievable strength last week. Light Sweet Crude Oil for March delivery traded as high as $66.66 on Thursday of last week before declining and ultimately rebounding on Friday.

Opec-led efforts to cut production have had a much more significant effect on global oil inventories than many industry analysts and traders expected. Inventories are decreasing and the oil market is, finally, getting closer to being rebalanced. Since the energy sector accounts for roughly 6% of the S&P 500, when the price of crude oil increases, shares of global energy companies tend to rally as well, and this has a very positive effect on the price performance of the S&P 500.

In the Week Ahead

Moving forward, there are 125 companies in the S&P 500 and 10 companies in the Dow Jones (there are only thirty companies total in the Dow Jones) reporting earnings this week. Due to the high concentration of earnings reports scheduled to be released next week, volatility is expected to increase. If major US companies fall short of expectations, the market could potentially see some downward pressure.

Or course, nothing can seem to keep the market down in 2018, so it wouldn’t be surprising to see pounce on any buying opportunity.

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