The Dow Surges To All-Time Record High

Weekly Market Insights

Last week, stocks soared to record highs as traders embraced cooler inflation data. The Dow Jones Industrial Avereage surged above 40,000 for the first time ever while several other major indices posted fresh new highs as well. The week began quietly, but volatility increased with mixed reactions to the April PPI report and a midmorning speech by Fed Chair Powell. Tuesday, Reddit’s famed “Roaring Kitty” came back and the meme stocks jumped higher while Google announced AI enhancements to its search function and the tech sector caught a bid. The rally continued Wednesday with in-line April CPI data showing declining inflation, further supporting expectations for Fed rate cuts. Walmart posted solid earnings on Thursday keeping alive the idea the consumer is strong and overshadowing a couple of weak economic data points, before a Fed speaker poured some cold water on the parade. Markets sold off Friday morning but were able to come back in a late day rally.

Key Takeaway:

Last Monday, I wrote the following:

“We are now within a stone’s throw of all-time highs and once again facing the valuation wall of worry with equities trading around 21x forward earnings. That’s a pretty high multiple historically and demands a Goldilocks economic scenario to continue, making this week’s data uber important to keep this rally alive.” 

And last week we got exactly what the market wanted via a favorable mix of declining inflation, the Federal Reserve’s assurance against further rate hikes, slowing economic growth data that pressured yields and increased expectations for rate cuts, along with strong earnings and macroeconomic news.  So, growth is positive but decelerating, the Fed is expected to cut rates soon, inflation is high but decreasing, and earnings remain robust. The keyword on CNBC this morning is “Goldilocks” and for good reason!

The Week Ahead:

This week’s key report is Thursday’s May flash PMI as it’s the first national economic indicator for the month. While markets would favor soft data due to its positive implications for Fed rate cut expectations, a major decline in activity is undesirable. An in-line or slightly lower-than-expected PMI will be well received.

Other notable reports include Wednesdays FOMC minutes and Friday’s Durable Goods and University of Michigan Inflation Expectations. The minutes should offer no surprises. Durable Goods offer insights into business spending and markets will once again favor slightly soft figures in the short term while the weaker the inflation expectations can come in, the better for markets.

Source:  Trading Economics (

Tidbits & Technicals: (New developments will be denoted via***)

Current Headwinds:

  • ***Valuations seem frothy given the current rate environment, leaving the markets subject to a potential swift pullback!
  • “Higher for Longer” – Risk that the Federal Reserve waits too long to begin lowering rates and threatens economic growth.
  • 10-year Treasury yields recently broke out to new highs for the year signaling that bond investors may be beginning to believe in the “Higher for Longer” thesis but have retreated more than 25 basis points (.25%) in May

Current Tailwinds:

  • Optimism surrounding Artificial Intelligence (AI)
  • Federal Reserve pivoting from raising rates to potentially cutting in the future.
  • Strong Labor Market
  • Solid Economic Growth
  • Continued Earnings Growth (the pace of which may be slowing)
  • Momentum
  • Participation is broadening with cyclicals taking a leadership role while the tech-trade begins to fade.


  • Credit Spreads remain tight, hitting their lowest levels recently since peaking in 2022 signaling the bond market (aka “Smart Money”) is not worried about a recession in the near future.
  • The VIX (CBOE Volatility Index) has completely reversed it tone and is back to the lower levels of the complacency zone.
  • ***The CNN FEAR & Greed Index got a further boost last week showing Investor Optimism is strong and Greed is prevailing.

Intermarket Trends:

  • ***The major Indices (Dow Jones Industrial Average, S&P 500, and NASDAQ) all posted new highs last week signifying a positive trend.
  • ***Bond investors have accepted the recently soft data as potentially impactful, and rates have retreated recently
  • The US Dollar is trading near the upper end of this year’s trading range due to foreign central banks being the first to cut rates and others taking further rate hikes off the table while the Fed continues its campaign of tough rhetoric.
  • Gold is trading near record highs.
  • ***Industrial Metals have raced higher recently and copper recently broke out of a multi-month trading range.
  • Oil futures have pulled back from recent highs and are trading in the middle of their one-year trading band.

Tying it all together:

A plethora of short term economic “growth” data have come up short of expectations lately and deserve our close attention. It’s one of those strange times where bad data is perceived as good data as it begets lower interest rates from the Federal Reserve in the future amidst decelerating inflationary environment but we must be careful what we wish for… Valuations are high as we sit squarely in the middle of the “Goldilocks” environment we were anticipating, yet markets only discount the same information once, and the path forward could have some surprises.

Markets have experienced a broadening effect, which is a good thing, but it’s noteworthy that some of the more defensive sectors have been leading the charge.  These sectors have been out of favor for a while and likely deserve a little attention but it’s hard to not consider this type of activity could also spell conservative repositioning ahead of a potentially choppy environment.

For now, this is all “to be watched” as the positives (full employment, declining inflation, economic growth, strong earnings, etc.) far outweigh the negatives and until those change, conditions are favorable for risk assets. Environments like this have best been navigated in the past by making certain one’s overall portfolio is in line with their risk tolerance and focused on achieving long term goals.

Please feel free to share these commentaries with friends and family and, should you have any questions regarding your current strategy or the markets in general, please reach out to your CIAS Investment Adviser Representative.

Important Disclosures:

Past performance is not indicative of future results.  This material is not financial advice or an offer to sell any product.  The statements contained herein are solely based upon the opinions of Edward J. Sabo and the data available at the time of publication of this report, and there is no assurance that any predicted or implied results will actually occur. Information was obtained from third-party sources, which are believed to be reliable, but are not guaranteed as to their accuracy or completeness.

The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Capital Investment Advisory Services, LLC (CIAS) reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings.  It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

CIAS is a registered investment advisor. More information about the advisor, including its investment strategies and objectives, can be obtained by visiting A copy of CIAS’s disclosure statement (Part 2 of Form ADV) is available, without charge, upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact us at (919) 831-2370 if you would like to receive this information.                                                        

Capital Investment Advisory Services, LLC
100 E. Six Forks Road, Ste. 200; Raleigh, North Carolina  27609

Securities offered through Capital Investment Group, Inc. & Capital Investment Brokerage, Inc.

100 East Six Forks Road; Raleigh, North Carolina  27609
Members FINRA and SIPC