Dow Drops 500 Points But Could End Year In The Green

The first half of 2022 has been quite rough for investors, and Monday was no exception: the Dow dropped roughly 500 points, which is equivalent to 1.5% of its value.

Despite this, the stock market continues to be in the middle of a tremendous rebound for the fourth quarter. The Dow Jones Industrial Average had its best month in the past almost half a century in October, and it has gained nearly another three percent so far in November. The chip index is just around 7% lower than it was at its all-time high, and it is only about 8% below its current level.

It would be an incredible turnaround for the Dow Jones Industrial Average if it were to recoup all of its previous losses and end the year in the black. As recently as the middle of October, the Dow was already in a bear market for 2022, having lost more than 21% of its value.

What exactly is going on? The leading industrial equities in the Dow have been on an upward trend, including Boeing (BA), Caterpillar (CAT), and Honeywell (HON). Shares of retail and consumer heavyweights such as Walgreens (WBA), Home Depot (HD), and Nike (NKE), as well as top banking companies such as Goldman Sachs (GS) and JPMorgan Chase, have also increased (JPM).

Both the S&P 500 and the Nasdaq are still quite far down in the red for 2022, with respective losses of 17% and roughly 30%. Both indices lost more than 1.5% of their value on Monday. However, even those indexes have made a significant recovery from the year-to-date lows they reached in the most recent weeks. There is also optimism that the economy of the United States will either endure what is known as a “soft landing” or a recession of just a moderate severity. If anything like that were to occur, it’s possible that consumer spending wouldn’t plummet off a cliff. Neither would the revenues of corporations. That would be beneficial for the stock market.
However, there are others who follow the market who are concerned that the dramatic bounce seen in the market over the past few weeks may have occurred too quickly. Are investors getting overly excited all of a sudden?
Others, however, are of the opinion that the stock market’s return may be merited. This is especially the case for equities that are popular with conservative investors, such as businesses that provide strong dividend rates.

“We believe that the stock market could reach a stable. It would appear that inflation is working with us. Earnings have been satisfactory thus far, according to John Augustine, chief investment officer at Huntington Private Bank. “However, we place a higher priority on income than expansion.”

Augustine recommended that investors “nibble” at the market rather than diving headfirst into stocks with a higher level of risk. It was brought to his attention that the S&P Dividend ETF (SDY), which holds high-yielding firms such as VF Corp (VFC), (owner of The North Face and Vans), IBM (IBM), and 3M (MMM), had actually gained 1% so far this year.

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However, a number of analysts are sounding the alarm that the selling on the market as a whole could not be over yet.

“I notice a lot of similarities to the recession that took place in the year 2000. According to John Duffy, co-founder of Trending Stocks, there were multiple instances in which the stock market made a recovery, only to see subsequent losses.

After the tech bubble burst in the year 2000, the stock market traded in a relatively narrow range over the next nearly three years, and the Nasdaq lagged behind both the Dow and the S&P 500 by a significant margin. It’s possible that will happen once again.

Given the ongoing concerns about the economy and the potential impact of rate hikes, Duffy stated that he would likewise be cautious about investing in consumer stocks. However, he believes that energy equities could be more resilient, and that stocks in industrials and minerals are also attractive.

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