WHAT IT IS
- On January 25, 2017 the Dow crossed the 20,000 point threshold for the first time and has continued higher since.
- The S&P 500 and the Nasdaq – the two other most commonly referenced indices – also hit record highs.
- This was the Dow’s second fastest 1,000 point climb ever (42 trading days); the climb from 10,000 to 20,000 has been relatively slow.
- Many attribute the rapid recent growth to the election of Donald Trump and the assumption that he will usher in a more business friendly government.
WHY IT MATTERS
It doesn’t… The 20,000-point milestone doesn’t really mean anything. It’s a big round number which makes it aesthetically pleasing and easy fodder for cable and print news, but there is no real significance behind the number. Even more, the Dow is, for all intents and purposes, an outdated benchmark largely ignored by investment professionals, and has been surpassed in significance by other benchmarks, specifically the S&P 500.
It does… Due to its age and longevity, the Dow is still the most widely known and followed index by your ‘Average Joe’ and it remains a large psychological and political flash point when discussing the economy. Even though it has been surpassed in technical accuracy and professional esteem by other benchmarks, it still does function as an adequate stand-in for the U.S. stock market, and thus the economy as a whole.
WHERE WE ARE NOW
- The market has continued to climb higher but opinions are split on whether this will continue or if we are due for a correction as a result of either climbing too high too fast or some crisis within the administration
THINGS TO THINK ABOUT
- How much longer can this bull market run, and is the “Trump Rally” a “Trump Bubble?”
- Will the market experience a large and sudden pullback if President Trump fails to deliver on slashing regulations, cutting taxes, and / or spending big on infrastructure?
- Given that Trump has taken credit for the market rally, will the current perceived chaos surrounding his administration continue and eventually reverse investors’ enthusiasm?
- Is the Dow and other indices an accurate representation of the health of the country’s economy or is it a distraction?