Since its closing price of 16,484.99 a year ago on 2/24/16, the DJIA has rallied a tremendous 26% in a move that virtually no one at the time was predicting.  What’s even more notable about the rally is how the gains have been confined to four distinct legs higher.  From late February to mid-April of 2016, after what was the worst start to a year in the market’s history, the DJIA saw the first leg higher, rallying 17.9%.  At that point, it rested for a little over two months, and then spiked 9.1% in late June following the Brexit vote, in what again was a rally that very few would have predicted at the time.  Towards late July, the market shifted its focus on the November election and drifted lower all summer into early fall.

The catalyst for the third leg higher over the last year came from another unlikely source as Donald Trump’s election, which was ‘supposed’ to trigger a cascade lower in equity prices, propelled the DJIA higher by over 11% through mid-December.  After that post-election surge, the conventional wisdom morphed into a strategy of “buy the election and sell the inauguration,” as all the good news of a Trump victory surely had to have been priced into the market before he even came into office.  Therefore, once in office, there was nowhere for the market to go but down.  With that sentiment in place, you guessed it, there was obviously nowhere for the market to go post-inauguration but up, and from late January through Friday, the DJIA started another leg higher!  This leg higher includes the current winning streak of eleven straight positive closes, which is the longest winning streak for the index since January 1992!  What is interesting about this most recent leg higher is that even as the market seems so extended, the percentage gain is the smallest of the four legs higher.

As mentioned above, the DJIA’s rally over the last year has been confined to four short spurts higher for the index.  In fact, the trading days included in these four legs higher comprise just 100 out of 254 trading days in the last year.  Even more notable is the fact that all four legs higher came at times when few if any investors were expecting them.  As any seasoned investor will tell you, the stock market’s single biggest role at any given time is to make the seemingly most intelligent investors look as foolish as possible.  Looking back at the last year, it has been mission accomplished.

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