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The Dow Jones Industrial Average Closes Higher for 13 Consecutive Days, Matching Longest Winning Streak Since 1987
A Historic Streak
The Dow Jones Industrial Average has closed higher for 13 consecutive days, marking its longest winning streak since 1987. On Wednesday, the 30-stock index added 82.05 points, or 0.23%, reaching a closing of 35,520.12. This impressive rally comes as traders digest a slew of earnings reports from corporate America. Strong second-quarter earnings from Boeing, a key component of the Dow, contributed to the positive sentiment. The company exceeded expectations after experiencing an increase in commercial aircraft deliveries.
Historical Data and Trends
When examining data from FactSet, it becomes evident that the Dow Jones index has had 15 winning streaks consisting of 10 or more consecutive days since 1929. Only four of these rallies extended for 12 days, with the longest winning streak record set at 13 days in 1987. The Dow can potentially break this record if it rises for 14 consecutive days on Thursday. This current impressive rally parallels the Dow's creation in May 1896, as it matches the longest streak ever since June 1897.
What Happens After a Winning Streak?
Examining past winning streaks can provide insights into potential future market movements. CNBC Pro analyzed the aftermath of stocks reaching record highs following a 10-day streak of gains. Historically, stocks tended to hold onto their profits and remained relatively flat in the week following the rally. In some cases, such as the 13-day rally starting on January 2, 1987, stocks rose by 2.2% in the following week. However, there were instances where stocks experienced losses, such as a 2.9% decline in the week following a 10-day rally on July 16, 1973. On average, stocks remained relatively flat one month after a 10-day winning streak. The 1987 and 1973 rallies stood out as the biggest winners and losers, respectively. In the quarter following a 10-day streak of gains, stocks historically returned an average of 2.4%. The most substantial return occurred after the 10-day rally that started on November 4, 1996, where investors gained 10.6%.
The Reasons Behind the Dow's Streak
Various factors contribute to the Dow's 13 consecutive sessions of gains, but one key reason is the easing of recession fears. According to Senior Portfolio Manager at Neuberger Berman, Steve Eisman, as long as there is no evidence of a recession, the market is likely to continue its upward trajectory. Eisman, known for his successful bets against the subprime mortgage crisis, believes that the current environment of low inflation is helping alleviate concerns about an economic downturn. Traders are now speculating that the Federal Reserve will halt interest rate hikes, which have previously hindered the economy's potential. Federal Reserve Chief Jerome Powell hinted after a recent rate hike that they may hold rates steady at the next meeting in September.
Conclusion: Implications for New Business
The Dow Jones Industrial Average's remarkable 13-day winning streak has certainly captured the attention of investors and market participants. While the immediate impact of this streak on new businesses may not be obvious, it does provide some valuable insights.
Firstly, the extended rally indicates a general sense of optimism and positive sentiment in the market. This can be seen through strong earnings reports from key companies like Boeing, which suggest a healthy corporate environment. For new businesses, this positive sentiment can create a favorable climate for growth and investment. Investors may be more willing to take risks and allocate capital towards innovative startups, leading to increased opportunities for funding and partnerships.
Historical data also suggests that winning streaks often lead to short-term stability in the market. After a streak of gains, stocks tend to hold onto their profits, remaining relatively flat in the week following the rally. While this might not directly benefit new businesses, it does provide some stability and reassurance in the broader market environment, which can indirectly support their operations.
Additionally, the reasons behind the Dow's streak, such as the easing of recession fears and speculation about the Federal Reserve's interest rate decisions, should be monitored by new businesses. A positive economic outlook and potential policy shifts can influence consumer confidence, spending patterns, and overall market conditions. Understanding these macroeconomic factors can help new businesses make informed decisions regarding their growth strategies, pricing models, and market positioning.
In summary, while the Dow's winning streak may not have an immediate impact on new businesses, it does signify a positive market sentiment and potential stability. As new businesses navigate their growth and development, keeping an eye on market trends and macroeconomic factors will be crucial for success in this evolving environment.
Article First Published at: https://www.cnbc.com/2023/07/27/heres-what-happens-to-the-dow-after-a-13-day-winning-streak-according-to-history.html.svg)
