Markets are reaching new highs in 2014. The S&P 500 is up 3.31% year to date, closing above 1,900 for the first time on Friday, May 23. It has continued to remain above 1,900, setting a new high on May 27 at 1,911.91.
The Dow Jones Industrial Average (DJIA) has also been pushing to new heights, reaching 16,715.44 on May 13. Returning 0.32% for May and 0.34% year to date, returns in the DJIA index have been led by financial stocks, specifically American Express (AXP) and JPMorgan Chase (JPM). AXP has posted a one week return of 3.64% with year to date return of 0.87%. JPMorgan Chase also showed a strong one week return of 2.46% with continued volatility appearing in its stock price as it struggles with regulatory dealings resulting from increased banking transparency.
Industrial stocks have also been strong in the Dow Jones Industrial Average. Caterpillar (CAT) leads the DJIA year to date with a return of 14.65%. United Technologies Corporation (UTX) and 3M (MMM) have also posted gains with year to date total return of 2.93% and 2.06%, respectively.
A number of factors have caused the market advances, with confidence in valuations leading the reasons. Key economic indicators have also led to the market improvements with unemployment and inflation under control according to the Federal Open Market Committee’s recent tapering activity.
Gross domestic product in the U.S. has also shown signs of improvement. The measure of economic activity has been steadily increasing since the second quarter of 2011. The Commerce Department’s latest reading showed a slight decrease of 1% seasonally adjusted for the first quarter of 2014, primarily attributed to a slowdown from the difficult winter. However, previous quarterly readings have been strong, averaging 2.5% since second quarter 2011 with a 4.1% increase in third quarter 2013 and a 2.6% increase in fourth quarter 2013, all on a seasonally adjusted basis.
In agreement with MarketWatch, which recently reported a lack of potential black swan events leading to market improvements, it appears that confidence in market valuations has been restored. Low volatility readings from the VIX continue to confirm that and increased transparency in U.S. markets has also led to increased returns.