The Dow Jones Industrial Average on Wednesday rose above 20,000 points for the first time marking a milestone for Wall Street’s venerable equity barometer as the Trump trade that stalled at the onset of 2017 resumes.
The gauge of blue-chip companies climbed 0.5 per cent to 20,014 in opening trading, as US equities extended their record-setting rally that began after the presidential election in November.
Investors have poured money into shares led by financials and other cyclical companies on hopes a mix of tax cuts and fiscal stimulus from the Trump administration will accelerate economic growth and inflation.
The Dow’s strong performance since the election reflects big gains for banks, including shares of Goldman Sachs which are up 29 per cent. Those of JPMorgan Chase have jumped 21 per cent.
Since the start of the year, however, the rally in the two groups has cooled, with investors rotating into Visa and Nike, two stocks that lagged behind from the election to the end of 2016 but are now up by more than 5 per cent year-to-date. IBM, the technology heavyweight, is also up by 6 per cent.
Launched in 1896 and comprising 30 of America’s best-known companies, the Dow has surged nearly 9 per cent since Donald Trump’s victory in the November election. As a price-weighted average, the Dow has been catapulted higher by strong gains in those member companies with the highest share prices, notably Goldman Sachs, currently trading around $234.
The S&P 500 — a benchmark created after the Dow and based on market capitalisation — is far more important to professional investors since it captures a broader cross-section of corporate America. It has trailed the Dow’s gains, rising 6.6 per cent since election day.
Still, the broad-market barometer is trading at a record peak. The recent leg higher has been catalysed not only by optimism over brightening conditions in America, but also ”improving global economic growth”, said Dennis DeBusschere, head of portfolio strategy at Evercore ISI.
Underscoring that point, a round of manufacturing surveys from Europe, the US and Asia all pointed to a continued rebound in activity as the year kicked off.
While the Dow’s march to 20,000 has captured attention, the “degree to which markets can manage to retain their collective stability and constructive trends” is of far more importance, said Peter Kenny, senior market strategist at Global Markets Advisory Group.
The Dow’s rise to 20,000 illustrates the vigour of the nearly eight-year bull market for US equities. The blue-chip average notched a bear-market closing low of 6,547.05 in March 2009, reclaiming the 10,000 mark in October of that year.
It has gained more than 13,000 points, or some 200 per cent from the crisis-era low. The S&P 500, meanwhile, has advanced 237 per cent from its bear-market low.
