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Dow hits record high – Nikko AM’s Chief Global Strategist John Vail comments

Following the record high for the Dow Jones Index John Vail, Chief Global Strategist, Nikko AM, commented:

“We expect global equities to continue rallying through the quarters ahead. New highs are not actually that rare; such have regularly occurred for stocks in most of the developed world since the 1980s and of course over the very long term, as well. We expect the S&P 500 to hit nearly 4700 next June, which should equate to about a 4% return including dividends; however, if earnings keep surprising strongly to the upside, then its returns will likely be near 10%.

“Also, much will depend on how fast the Fed decides to taper and indicate higher interest rates. We expect a more hawkish Fed than the market, but it could even surprise us on the hawkish side if inflation keeps accelerating in 2022. Another reason for a touch of caution is that US equity valuations are a bit on the high side, especially if bond yields keep rising. For Japan, however, equity valuations are quite low despite earnings upgrades being very strong in aggregate. Although the auto sector is struggling with shortages, other industries are rebounding, especially in the months ahead, as the domestic economy opens up again after the Olympics-shutdown burden passed.”

 

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