After more than a month of flirting with the barrier — which is far more important psychologically and sociologically than it is in terms of stock valuations — the latest market leg higher has put the blue chip index over 20,000.
In early trade on Wednesday, the Dow was trading around 20,012, up about 98 points on the day. The S&P 500 was also up about 10 points to 2,292, a new record, while the Nasdaq was up 34 points to 5,635, also a record.
On Tuesday, both the S&P 500 and the Nasdaq hit new record intraday and closing highs. The last time we saw the Dow get close to 20,000 without cracking the barrier was on January 6 after the December jobs report. On that day, the Dow got as high as 19,999.63, a scant 0.37 points away from the milestone.
And so with US stocks higher and Treasury yields rising, the “Trump trade” we saw play out in the weeks after the election appears, to some extent, to be back on.
On Wednesday morning, Trump tweeted after the Dow crossed the 20,000 milestone, saying simply: “Great!”
— President Trump (@POTUS) January 25, 2017
On Tuesday, stocks rallied on Donald Trump’s second day in office as Trump with materials stocks leading the way after Trump signed orders that clear the path to complete the Keystone XL and Dakota Access pipelines. A New York Times report late Tuesday also said Trump would move Wednesday to order the building of a border wall between the US and Mexico.
Of course, the Dow breaking 20,000 does not mean markets have had all their concerns about Trump addressed — it just means stocks have traded a bit higher in recent days. And, certainly, there are still complications to work through on tax cuts and infrastructure spending, which are the positive drivers of this trade, as well as trade policy, which poses the biggest downside risk.
And of course, there is nothing inherently meaningful about the Dow hitting 20,000 beyond it being a reflection of how much investors want to pay for a cut of future corporate profits.
But as a psychological mile-marker Dow 20,000 does matter.
The Dow is the people’s index and is the one you’re most likely to find quoted in non-financial news reports about the stock market. And while this fact certainly rankles market participants who know the cap-weighting of the Dow is sort of nonsensical, or that the Wilshire 5000 is the real way to capture the total US stock market, public perception matters.
And now we get to say the Dow cracked 20,000 for the time — and get back to focusing on almost anything else.