Every day, the markets close at fresh record highs, raising the risks for markets trading at unsustainably high valuations. On Monday, both the S&P 500 (IVV) and the Dow Jones (DJI) closed at new highs.
The Dow benefited from McDonald’s (MCD), Apple (AAPL), and UnitedHealth Group (UNH) trading higher. McDonald’s is the dominant restaurant firm to watch. It is driving consumer traffic with its $5 meal deal. Additionally, the Big Arch Burger and Chicken Big Mac will raise profit margins.
The firm tested the Chicken Big Mac in international markets with success. The unique flavors should lead to return customers.
Strong Earnings
Looking ahead, companies should continue to beat the earnings consensus estimate. The 30 firms that posted results beat estimates by 5% on average. This trend would justify stocks closing at all-time highs.
The upcoming elections are another positive catalyst. Politicians need to spend on advertising, which benefits cable companies like Comcast (CMCSA).
Risks
September’s retail sales report may signal a risk for the economy. Consumers potentially cut spending after inflationary pressures continued last month. Although retailers like Walmart (WMT) and Costco (COST) will thrive, watch out for luxury stocks underperforming.
Estee Lauder (EL), Ulta Beauty (ULTA), and Lululemon (LULU) may not perform well if customers spend less at those stores.