The waiting 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 the iconic stock index traded at 6,547 and 54% below its then-peak – is now a reality.
In a historic moment on Wall Street, the Dow Jones industrial average eclipsed the 20,000 level Wednesday for the first time in its 120-year history. The Dow jumped more than 100 points at the open of trading to hit an intraday record high of 20,033.77.
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 sprint from one 1,000-point marker to the next, 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 205% move from its bear market low in March 2009, marked by a final dash of nearly 1,700 points, or more than 9%, since Election Day when Donald Trump’s surprise win and business-friendly policy proposals set in motion a massive rise in stock prices.
The Dow's final punch above 20,000 comes 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 via his "America First" economic policies.
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 its latest milestone will mark an eventual market top like Dow 10,000 did back in 1999 and usher in another long money-losing period for stock investors?
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 troughed, 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 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 under president-elect Trump and a shift in the key market driver from Fed-driven stimulus like 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,” Ari Wald, a stock market analyst at money-management firm Oppenheimer, said in the run-up to the milestone. “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 get enacted, 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.
What's more, market gains often stall near big, round numbers like Dow 20,000.
"Typically, major milestones have acted as ceilings, and for an index to break through convincingly takes a lot of energy," says Brad McMillan, chief investment officer at Commonwealth Financial Network.
