The Equity Markets in 2024-2025

In the past couple of months, there have been changes in the economic and geopolitical landscape. Rising unemployment and the escalation in the Middle East created volatility in the global markets. Investors are feeling confused while the upcoming US elections make things even more complex.

These are some of the key concerns for investors for the upcoming months and years:

• What are the probabilities for slower economic growth or even a mini-recession in 2025?
• Will the upcoming FED/ECB rate cuts be enough to deal with this challenging economic environment?
• How dangerous can prove for the global economy a potential escalation of the conflict in the Middle East?
• Can the war on Ukraine end in 2025?
• Which candidate for the US presidency will be best for the economy and the stock market?
• What happens to the corporate tax rate if Democrats win?
• What will be the impact on global commerce and inflation if Trump wins and applies a 10% tax on imports?

Let’s start with the global economic outlook before moving forward with the impact of the US elections.

Read more: Stock Market Analysis for 2024-2025 - How Expensive are Stocks?

Dow Jones Industrial and the Duration of the Bull Party

Dow Jones Industrial (Dow 30) is one of the best stock-market indices in the world to test a technical analysis system. It is such an old index that can provide a unique insight into historical data. Dow Jones has entered recently a price area of historical highs. Using fundamental and technical analysis we are going to see what happens next. But let's start with the signal first.

From a Macroeconomic Point of View

The US economy is in a much better condition than 2 years ago. Growth is stable, unemployment is falling and the credibility of the US financial system is improving. What could ruin this nice macroeconomic picture could derive mainly from 2 facts:

Factor-1) The European Crisis

The European crisis is certainly a very important issue for the world economy. In 2013, Europe is officially in recession while the political conditions in the South of Europe are making the macroeconomic environment unpredictable. For the time, the last episode of the European Crisis (Cyprus Crisis) seems to come to an end and during the next couple of weeks, things in Europe can get back to normal.

Factor-2) A Stronger Dollar

As unemployment is falling and the US economy is growing the concerns of FED are moving more to inflation. The US interest rates have only one way to go and that is up. Higher US interest rates given the bad condition of the European Economy could strengthen the Dollar against the Euro to 1.20, but even to 1.0 in the next couple of years. That could jeopardize the macroeconomic prosperity of the US economy. But for the time, Euro is already in oversold levels against the US Dollar and it is expected to remain in the area above 1.2900 for some time ahead. So as concerns the next couple of weeks a stronger US Dollar is not a danger for the US economy and the Dow Jones Industrial that we are interested in.

Read more: Dow Jones Industrial March 2013

MOVE can provide an early alert regarding a changing risk sentiment in the bond market but also in in the general financial markets, ahead of the equity markets.

The MOVE Index measures U.S. interest rate volatility. The index tracks the movement in U.S. Treasury yield volatility implied by current prices of 1-month OTC options.

Read more: The MOVE Volatility Index and the Correlation to the S&P500

The US Dollar Index and the Dow Jones Industrial (March-April 2017)

• ■ Markets: Foreign Exchange, Equity Markets
• ■ Assets: US Dollar Index (USDX) / US30 (DJIA)

Financial Markets –The General Outlook

After Donald Trump’s election, investors anticipate that high inflation will return in the US. There are some good arguments backing that assumption, including new Trump’s policies regarding tax cuts, higher public investment, and the imposition of tariffs on imported industrial goods. Lower unemployment and higher wages strengthen furthermore the prospect for higher consumer prices in the future. These inflationary anticipations create positive momentum for the US Dollar and the US equity markets. On the other hand, higher inflation means higher interest rates and that signals an escape from the bullish bond market of the past 30 years. It is no secret that since November 2016, 4 trillion USD have flown from the bond markets to the equity markets. Furthermore, as concerns equity markets, the VIX equity volatility remains close to historic lows signaling the continuation of the equity rally, at least for the time.

Chart: CBOE VIX Volatility Chart (S&P500)

Trading Rebates: » Forex Trading Rebates via Forex-Rebates.com

Applying TCI on USDX & Dow Jones Industrial

The Trading Center Indicator (TCI) applied on the US Dollar Index (USDX) and on Dow Jones Industrial Average (DJIA). The chart below shows graphically the daily TCI indications for the period of November 2010 to March 2017. The USDX (upper) chart includes the 89-day simple moving average (SMA), while the US30 (lower) chart includes the 144-day SMA.

Read more: USDX and DJIA March-April 2017

It was always difficult for humankind to cope with change, and it is even harder to realize how much the macroeconomic landscape has changed in the past couple of years. The unseen economic impact of the pandemic forced central banks to cut interest rates and boost market liquidity to record levels. In this environment of extreme liquidity and zero (risk-free) returns, the rally in equities and other hard assets was completely reasonable and expected. As reasonable and expected was the correction we saw lately. Let’s not forget that from the March 2020 lows, equities rallied over 100% without a major correction.

Read more: The Stock Market in 2021-2022

Dow Jones Report & TCI Trading Signal

• Asset: Dow Jones Industrial (DJIA)
• Period: September-October 2015

TCI Forecast: DJIA to complete its uptrend in September (↑) starting a new bear market in early October (↓)

Dow Jones has moved considerably lower since July 2015, from 18.137 points in July, 20th now it is trading at 16.102 points. There are quite a few reasons that could explain why the investor’s sentiment has changed from bullish to bearish so rapidly. Nevertheless, what seems to drive the market at this point isn’t hard fundamental data but a fragile investor’s psychology. The US Equity Markets are rising 7 years in a row now, since 2009, and maybe it’s time for a strong correction that will make valuations cheap again.

Is Dow Jones an expensive market today in terms of earnings? Let’s find out how the P/Es and Dividends (%) of the US Markets are formed after the August slump.

Dow Jones, S&P 500 and Nasdaq Earnings Report

These are the P/Es and Dividend Yields of the major US Equity Indices as concerns the valuations of September, 4th 2015.

+Today: September, 4th 2015

Read more: Dow Jones September-October 2015