The Dow Moves to Record Highs Again, But Is the Bull Slowing Down?

On Wednesday morning, the stock market continued its celebration from yesterday's big 18,000 milestone for the Dow Jones Industrials , adding further gains on the heels of a favorable report on jobless claims and a generally positive mood in a holiday-shortened session of stock trading. As of 11 a.m. EST, the Dow was up 56 points to 18,080, and the S&P 500 moved further into record territory as well. Energy stocks gave up some of their previous gains, but strength from athletic giant Nike and other sectors helped keep the broader market moving higher.

As 2014 comes to a close, it's interesting to look back at the year and how it fits into the broader bull market. If the Dow holds on to its morning gains, it will mark the index's 35th record close in 2014. That's an impressive figure and would make 2014 the year with the second-most record closes since 2000. But it nevertheless represents a slowdown from 2013's 52 record closes, making some wonder whether the bull market is running out of steam.

Source: Wikimedia Commons.

For the S&P 500, though, 2014 has been a banner year. Yesterday's record close was its 51st of the year, already eclipsing the 45 record highs the index put up in 2013. That's particularly impressive given that the index climbed only about half as much in 2014 as it did last year -- 15% year to date compared to 32% in 2013.

In the short run, most investors appear prepared for a continued push higher as year-end enthusiasm starts to build momentum and feed on itself. Favorable economic conditions should provide a baseline of positive news that bullish investors can use to justify gradual market gains. As long as major news on the geopolitical or global macroeconomic fronts does not signal any new crisis, the modest upward trend in stocks could continue for some time.

Moreover, an influx of new money often comes into the market in January, producing further gains. With bonuses expected to rise in many key industries in 2014 compared to recent years, the portion of that money that is invested will tend to push asset prices higher. Meanwhile, whatever bonus recipients spend on themselves will bolster the prospects of consumer-oriented stocks and drive stock market gains indirectly.

As 2015 progresses, the market will face some new challenges. The Federal Reserve has signaled that it could start raising rates as early as midyear; stocks have generally fared poorly in rising-rate environments, with some interest rate hikes leading to the end of past bull markets. Yet given the Fed's assurances that it will be deliberate in its attempts to get monetary policy back to more normal levels, 2015 could still produce enough gains to keep the bull going.

As the stock market hits new records, it's important not to get too complacent in your investing. But you also should not assume that a stock market crash is imminent. Sticking with a steady investing strategy you can follow in good times and bad is the best way to navigate the ups and downs of the stock market throughout 2015 and beyond.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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