Record stock market: Dow hits 20,000
The Dow hits 20,000, making history today by blowing past that key level for the first time ever.
The historic milestone leaves the Dow up more than 1,700 points since President Donald Trump’s victory in November. The achievement is evidence of how optimistic investors have become about the prospects for the U.S. economy.
“The stock market has given him this extraordinary vote of approval. Happy days are here again,” said Ed Yardeni, president of Yardeni Research.
Trump’s plans are cutting taxes, ramping up spending on infrastructure and cuts to regulation appear to be appealing to investors.
The Dow 20,000 milestone also shows how much has changed in the U.S. economy over the past eight years. The index crashed to a low of 6,440 in March 2009 as Wall Street feared a complete collapse of the American financial system.
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The astounding 13,500-point rise since then has been fueled by a massive printing of over $4 trillion and 0%/near-0% interest rates.
“The economy has come a long way in eight years. Overall, it’s a healthier economy and does justify a much higher stock market than eight years ago,” said David Kelly, chief global strategist at JPMorgan Funds.
Bank stocks have been among the biggest winners during the post-election party on Wall Street.
JPMorgan Chase (JPM) and Morgan Stanley (MS) have soared more than 20%, while Goldman Sachs (GS) is up nearly 30%, as investors bet on higher interest rates and less regulation under Trump.
JPMorgan’s Kelly worries that “markets seem to be pricing in the positives, and not worrying too much about the negatives” such as a potential trade war or fiscal stimulus that overheats the economy.
Quinlan agrees that trade remains a serious risk given Trump’s anti-trade rhetoric during the campaign. Already, Trump has scrapped the TPP trade deal and plans to start renegotiating NAFTA.
“We need open borders, open trade and open flow of capital. If we start going down this deglobalization road, this market is going to lose its euphoric underpins pretty quickly,” Quinlan said.
Yardeni said the jury is still out on whether the enthusiasm on Wall Street is overdone.
“Is the market irrationally exuberant or will Trump prevail in a way that’s bullish for the economy?” he asked. “The bottom line on Trump is: love him or hate him, you don’t want to bet against him.”
