Is the Smart Money Behind the Dow's Boom?

Is the Smart Money Behind the Dow's Boom?

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

In advance of a key decision from the Federal Reserve tomorrow, the stock market continued its recent push higher. By 10:45 a.m. EDT, the Dow Jones Industrials were up another 40 points, resting less than 1% below a potential new all-time high. The beginning of the Federal Reserve's meeting today dominated investors' attention, and until we get a final pronouncement about the future direction of U.S. monetary policy, the markets will likely remain distracted and uncertain in their movements.

One thing that might be pushing the market higher is the fund management industry. A recent survey of fund managers by Merrill Lynch found that stock allocations among fund managers reached their most stock-heavy levels since early 2011, with U.S. stocks about 60% overweight compared to historical levels. By contrast, emerging markets and bonds are still unpopular as fears that Fed "tapering" could lead to further losses in those areas weigh on the asset classes.

Among Dow components, JPMorgan Chase is flat after CEO Jamie Dimon sent a memo to employees outlining efforts that the bank is taking to rein in legal risks and take greater control of compliance issues. Setting top priority to improving internal controls, JPMorgan is clearly responding to the billions of dollars in lost profits, legal settlements, and other costs that have resulted from lapses in its risk management. Success could help the bank improve its financial condition and its relationships with regulatory agencies.

Boeing is up more than 1% as it becomes increasingly likely that it will win a lucrative $7.7 billion fighter-jet contract from the South Korean government. A military official said Boeing's F-15 SE was the only qualified aircraft to meet South Korea's needs, with LockheedMartin's rival F-35 coming in over budget.Boeing could get official confirmation of the good news by early next week, when the nation's defense minister is expected to announce a final decision.

Finally, UnitedHealth is down 1%. Investors are paying close attention to the Oct. 1 start date of Obamacare's health insurance exchanges, especially given that UnitedHealth and many of its peers have taken a conservative approach toward joining the exchanges, opting out of programs in several states. Even with the stock's fluctuations in recent days, the question that long-term investors need to consider is whether the amount of subsidy-funding from the federal government will be adequate to compensate UnitedHealth and its peers for the costs of complying with added regulation and other requirements. If it is, then UnitedHealth will likely take steps to maximize its profit potential from the program.

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Fool contributor Dan Caplinger owns warrants on JPMorgan Chase. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends UnitedHealth Group. The Motley Fool owns shares of JPMorgan Chase and Lockheed Martin. 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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