[New York Close] Bullish Investors Warning of Soaring Stock Market

[Asia Economy New York=Correspondent Baek Jong-min] The US stock market is advancing toward the uncharted Dow Jones Industrial Average 30,000 mark. Despite the prevailing optimism, as the upward trend continues, concerns about a short-term correction are also emerging among experts.

[Image source=AP Yonhap News]

On the 17th (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed at 29,348.10, up 50.46 points (0.17%) from the previous day. After breaking the 29,000 mark for the first time ever this week based on closing prices, the index has continued to rise, now approaching the threshold of 30,000.

The S&P 500 also rose by 12.81 points (0.39%) to close at 3,329.62, and the tech-heavy Nasdaq Composite increased by 31.81 points (0.34%) to 9,388.94, with all three major New York stock indices setting new record highs day after day. The S&P 500, which had a larger gain than the Dow, has already posted a 3% increase this year.

Jeremy Siegel, a professor at the Wharton School and a prominent bull, issued an unusually cautionary statement. In an interview with CNBC, he said, "The Dow Jones will surpass 30,000 within the next 10 trading days," but also warned, "There is a possibility of a 10% correction." He pointed out, "The upward momentum is too fast. If it moves too quickly, it can be knocked down by even a small pebble." This implies a warning against short-term investments that ride the market rally rather than long-term investing.

This week, the market cheered as President Donald Trump signed the 'Phase One Trade Agreement' with China on the 15th, and the revised United States-Mexico-Canada Agreement (USMCA) was ratified by the Senate.

The US Department of Commerce announced that new housing starts in December last year surged 16.9% month-over-month to 1.608 million units, the highest since 1.649 million units in December 2006. News that China's economic growth rate last year was 6.1%, the lowest in 29 years since 1990, did not hinder the market.

However, concerns are rising due to the large gains since the beginning of the year. According to CNBC, the Ned Davis Daily Trading Sentiment Index released by Ned Davis Research reached 80. The research institute explained that this level indicates excessive bullish expectations. Since 2006, whenever this index exceeded 62.5, the S&P 500 experienced a 5% annual decline.

Ned Davis, founder of Ned Davis Research, diagnosed, "Short-term trading sentiment is overly optimistic," and added, "Investors have leaned toward optimism since the new year, but there is a significant possibility of a short-term correction."

Although the current price-to-earnings ratio of S&P 500 companies is 18.6 times, the highest since January last year, the market capitalization to GDP ratio is at an all-time high, raising concerns about a potential upcoming correction.

However, it is not easy to assume that a correction will happen immediately. Craig Johnson of Piper Sandler explained, "Historically, buying momentum has continued until a sufficient correction occurs."

Ultimately, earnings are crucial. Following the earnings reports of major financial companies that energized the market last week, manufacturing and technology companies need to maintain momentum. According to market research firm FactSet, about 7% of S&P 500 companies have reported fourth-quarter earnings, with over 70% exceeding market expectations, but there are also concerns that the overall profit size falls short of forecasts. This means that corporate earnings must support the current bull market.

This content was produced with the assistance of AI translation services.