Examining the Market’s Recent Highs

November 19, 2021

By Tim Courtney, Chief Investment Officer

The fourth quarter has thus far proven to be a strong period for stocks. The Dow recently crossed 36,000 for the first time. A few weeks ago the S&P 500 posted its 64th record close of the year on an eight day win streak — its longest winning streak since April 2019.1 The Nasdaq also had recorded an 11th straight day of gains, the longest such win streak since December 2019.2

There are several variables moving markets to record highs. From a fundamental perspective, earnings continue to be higher than expected and profit margins, which are near all-time highs, appear to be holding steady even with supply chain challenges.3 Secondly, investors were concerned going into the fourth quarter about tax policy uncertainty. However, most of the aggressive changes to corporate and personal tax rates do not appear likely to materialize.

Even so, many investors question the market’s continued runup as it seems almost too good to be true. The S&P 500 rose 100% in 354 trading days when it typically takes 1,000 trading days during a bull market for that level of growth to occur.4 In addition, there are usually multiple 10% corrections within these bull market periods, but we haven’t had even one over the last year and a half.5

The market’s recent behavior certainly could have been influenced by several non-fundamental factors as well. For example, much more trading is being done in the more speculative corners of the market, such as in the well-publicized cases of GameStop, Hertz and AMC. There is a large amount of leverage in the markets, not only through the use of account margin and borrowing, but also the increased use of options trading. As of September, an average of 39 million options contracts are traded daily. This is a record amount of volume and is double the amount of just three years ago.6 The increased use of options, a form of leverage, is moving markets in a way we’ve never seen before.

Much of the growth in stock markets can be justified by the fundamentals of a recovering economy, healing households and corporate balance sheets, increased spending, and record profits and profit margins. There are still non-fundamental factors moving markets, however. This is nothing new and is a part of the uncertainty that investors always face with markets. There are multiple variables at work in prices and they can sometimes create volatility. It is that very risk that allows for the higher expected return that stocks have enjoyed over longer periods of time.

Our investment team continually reviews positions within our investment strategies, and it is especially helpful to do this as we near year-end. If you would like to review your overall portfolio allocation and any changes that might be considered before year-end, please contact your advisor to discuss.


  1. MarketWatch (11/9/21) — U.S. stocks end lower, snapping win streak as Dow, S&P 500, Nasdaq retreat from peaks
  2. MarketWatch (11/9/21) — S&P 500 and Nasdaq Composite drift higher early Tuesday but Dow under pressure
  3. CNBC.com (11/1/21) — S&P 500 rises to another record on strong earnings, Dow gains 130 points
  4. CNBC.com (8/16/21) — S&P 500 doubles from its pandemic bottom, marking the fastest bull market rally since WWII
  5. Yahoo! Finance (3/23/20-11/18/21) — S&P 500
  6. The Wall Street Journal (9/26/21) — Individuals embrace options trading, turbocharging stock markets

The Dow Jones Industrial Average (DJIA), also known as the Dow 30, is a stock market index
that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock
Exchange and the NASDAQ. The DJIA is the second oldest U.S. market index; the first was
the Dow Jones Transportation Average. The DJIA was designed to serve as a proxy for the
health of the broader U.S. economy.

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 9.9 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 3.4 trillion of this total. The index includes 500 leading companies and covers approximately 80% of available market capitalization.

The term “Nasdaq” is also used to refer to the Nasdaq Composite, an index of more than 3,000 stocks listed on the Nasdaq exchange that includes the world’s foremost technology and biotech giants such as Apple, Google, Microsoft, Meta (formerly Facebook), Amazon, and Intel.

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