Dow Jones, DAX 30, Nikkei 225 Forecasts: Bearish
- The Dow Jones closed higher for the week, suffering minimal losses on Friday compared to the Nasdaq
- The DAX 30 will juggle an economic recovery and an uptick in coronavirus cases in Europe
- The Nikkei 225 may remain a laggard compared to its western counterparts
Dow Jones Forecast
September saw equity markets tread lower as resurgent covid cases suppressed economic recovery hopes and US election uncertainty eroded risk appetite. Nevertheless, stocks emerged victorious in the third quarter, continuing their ascent from the covid-crash lows. With the fourth quarter upon us, can equity markets continue higher or will election uncertainty and a second coronavirus wave overwhelm bulls and accommodative monetary policy?
Dow Jones Price Chart: 4 – Hour Time Frame (May 2020 – October 2020)
While it is difficult to forecast directional moves with certainty, the themes and conditions that the market will have to endure are more readily apparent. To be sure, it seems the same themes that dominated September trading will continue into the fourth quarter in the form of stimulus hopes, political developments and accommodative monetary policy. Thus, the Dow Jones, S&P 500 and particularly the Nasdaq 100 look poised to continue leading speculative risk appetite in equity markets.
That being said, the Dow Jones finds itself in an interesting position. Lacking significant technology exposure, the Dow has missed out on some of the bullish extremes experienced by the Nasdaq, but also some of the targeted declines in the tech sector that became commonplace in September. Consequently, the Dow might be in an ideal position to benefit – relative to the tech-heavy Nasdaq 100 – in the event of a stimulus package that would lift corporations that are more closely aligned with a traditional economy.
Either way, US equities appear vulnerable heading into a historically volatile time of year. While the DAX 30, CAC 40 and Nikkei 225 juggle concerns of their own, they might enjoy a comparatively stable political backdrop that could help soothe fear. To read the complete fourth quarter forecast for the major equity markets, download the guide using the banner below.
–Written by Peter Hanks, Strategist for DailyFX.com