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Afternoon Note

Dow 40,000

By Karina Hernandez, Senior Research Analyst
5/16/2024 1:23 PM

It is a modest session, one that will get more press than usual because of the milestone for the Dow Jones Industrial Average (DJIA) crossing 40,000 for the first time. The good news is it’s a milestone, and like any milestone, it speaks of opportunity, achievement, and potential.

Consumer Staples is the best performer this afternoon driven by Walmart (WMT) after reporting strong earnings this morning. Other retailers in the sector are trading higher as well, such as Dollar General (DG) and Target (TGT).

On the economic front, Industrial production remains flat and Manufacturing activity was soft in April.

We got a question from one of our subscribers.

While it's made a noticeable move, there should be a lot more greed. You and the analysts on your show keep saying the market is due for a correction, yet it never comes. We are told that once a year the market corrects up to 10%, yet it has not happened. Will there be no substantial corrections this year with all the turmoil and overbought conditions?

People are cautious because we are told something is supposed to happen, yet it continues to be elusive. Just like the calls for a recession, a pullback seems to be right around the corner, but never happens.

Our response:

Never is a long time.  There was a 5.5% drawdown, but you are right, the big shoe hasn't dropped.

The average drawdown during the second year of a bull market is 9.4%. The market is elastic and always reverts to the mean, so ride the wave. But it will come down at some point.

This is not a fundamentally driven market.

To your point, this is the reason we never go to all cash (20-30% is the high-end), so we have exposure. We have tried to be smart.

Too many people are too cocky and indifferent to risks. -CP



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