Dow Hits All-Time High, Cracks 20,000 for the First Time Ever
BY: Adam Shell
The wait is finally over.
Dow 20,000 – a milestone that seemed out of reach and had a science-fiction feel to it at the 2009 market low when it traded at 6,547, 54% below its then-peak – is now a reality.
In a historic moment on Wall Street, the Dow Jones industrial average eclipsed the milestone Wednesday for the first time in its 120-year history. The Dow jumped 155.80 points, or 0.8% to close at a record high of 20,068.51, and touched 20,082, during the day. The rally was broad, with the Standard & Poor’s 500 and the Nasdaq composite also closing at all-time highs.
It took the Dow, a stock gauge made up of 30 of America’s best-known blue-chip companies, just 64 calendar days to climb from 19,000 to 20,000, its second-fastest thousand-point sprint, according to S&P Dow Jones Indices. The climb from 10,000 to 11,000 back in 1999 took 35 days.
“It’s a nice mile marker,” says Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners.
The run to Dow 20,000 punctuates a massive 207% move from its bear market low in March 2009, marked by a final dash of more than 1,700 points, or 9.5%, since Election Day when Donald Trump’s surprise White House win and business friendly policy proposals set a rally in motion. The Dow flirted with 20,000 since mid-December, causing great frustration among investors. Dow 20,000-watch hit a fever pitch on Jan. 6 when it got within 0.37 points of the barrier, before dipping in eight of the next 10 sessions.
The breakthrough came just four trading days into Trump’s presidency, a whirlwind in which the billionaire has reaffirmed his commitment to strengthen the U.S. economy and create more jobs and higher wages for workers. Still, nearly half of Americans have not benefited from the so-called “Trump Rally,” which has generated more than $2.2 trillion in paper gains for the Wilshire 5000 Total Stock Index since Election Day. The reason: only 52% of Americans polled by Gallup last April said they “have money invested in stocks” — the lowest stock ownership rate in the 19 years Gallup has tracked the data and down sharply from 65% in 2007 before the financial crisis.
The Dow’s rewriting of the record books also kicks off a debate as to whether the new record marks the start of a new up leg for the nearly 8-year-old bull market, or whether it will mark an eventual market top as Dow 10,000 did in 1999, and usher in another long money-losing period.
To say anyone saw Dow 20,000 coming in early 2009 at the bottom of the worst market meltdown since the Great Depression would probably be telling a fib. On March 9, 2009, the day the Dow hit bottom, pessimism dominated. Chatter about Dow 5,000 – not Dow 20,000 or even Dow 10,000 — was making the rounds. “Dow 5,000? There’s a Case for It,” a Wall Street Journal headline declared.
The pessimists were wrong. The Dow, thanks to bailouts of banks, automakers and other companies engineered by the Obama administration, and unprecedented monetary stimulus from the U.S. Federal Reserve that enabled the economy to heal and U.S. companies to start making money again, was able to mount a comeback few Wall Street pros saw coming or thought possible.
Bulls are now betting on a better economy and a shift in the key market driver from low interest rates, to fiscal spending by the federal government to push stock prices higher.
“Our market indicators are pointing to a healthy advance and we recommend investing like this is a healthy advance,” said Ari Wald, a stock market analyst at money-management firm Oppenheimer. “Should Dow 20,000 bring sellers in, we expect it to be short-lived and to be followed by higher highs.”
Given that the Dow’s latest surge has been driven mainly by hopes that Trump’s plans to lower corporate taxes, reduce regulations on businesses and spend billions on infrastructure will be enacted and juice the economy, some Wall Street pros are urging caution, given that the stock market is no longer cheap.
“It can be very dangerous to get too caught up in the market’s euphoria about as-yet unfulfilled campaign promises,” says Michael Farr, president of money management firm Farr, Miller & Washington. The Dow’s surge the past two sessions, however, has been partly driven by Trump’s quick start in moving his agenda forward, but many details remain scant, Farr adds. “The trend is up for now, but know it won’t last forever.”
What’s more, market gains often stall near big, round numbers like Dow 20,000.
“Typically, major milestones have acted as ceilings,” says Brad McMillan, chief investment officer at Commonwealth Financial Network, “and for an index to break through convincingly takes a lot of energy.”