“A prudent speculator never argues with the tape. Markets are never wrong, opinions often are.” Jesse Livermore
While Closing at 20,000 will be a milestone for the Dow Jones industrial average it will have been since 1999 that the Dow was half that.
What really matters to investors is percentage gains, not the number of points the Dow adds over time.
What really matters to traders on the other hand is implementing a trade plan and sticking by it.
“The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money everyday, as though they were working for regular wages.”
Over trading is an easy route to begin on the road of dwindling your profits away. Another common mistake is to overlook the broader economic spectrum that we are investing or trading in.
With Republicans controlling both the White House and the Congress, the stage is set for massive tax cuts for businesses and the wealthy. Both President Trump and Speaker of the House Paul Ryan have released plans that would slash taxes. Speculators can argue that the market has already priced in a business-friendly environment in Washington and the hope of moderately better global growth in 2017. At the same time, valuations are at historic highs and corporations continue to invest in buybacks over sustainable long-term growth to revenue and profits.
Although 2017 will be a year that is difficult to forecast, we know that risk premiums are largely static and earnings growth remains optimistic. The big variable remains debate over policy going forward, which could create periods of higher volatility as that plays out.