Dow 20,000 - What Does It Mean?

The financial media is completely focused on the Dow reaching 20,000, an all-time high. It's important for investors to realize that while seeing the Dow hit 20,000 for the first time will be a psychological milestone, it's really not that significant.

If you think about it, there's no more reason to celebrate Dow 20,000 than any other number that was recently reached for the first time.

Also, keep in mind that the Dow only represents 30 of the thousands of stocks that make up the broader US equity market. Because it only represents 30 stocks, outsize moves in any one of its components can have a big impact of the Dow. From example, the surge in shares of Goldman Sachs (which has benefitted recently from expectations of less regulations and higher interest rates) has contributed about one-third of the Dow's recent 1,000 point move since hitting 19,000 back on Nov. 22.

It is also worth pointing our that 1,000 point moves for the Dow aren't what they used to be. When the Dow doubled from 1,000 to 2,000 which it hit in 1987, that move represented an 100% increase, but an increase from 19,000 to 20,000 only represents a 5.26% move. This example highlights the silliness of keying in on arbitrary milestones.

The best advice we can give for Dow 20,000 is to stay focused on your financial goals. This advice will also hold true at Dow 25,000, Dow 30,000, and any other index-related milestones that may be reached during your lifetime. We are not sure if the market will continue to set new records in the next few weeks or months, but we are confident that the market will continue to set new all-time highs in the future. Investing should not be about index returns, it is about attaining your long-term financial goals.

Bottom Line: While you're likely to see headlines celebrating Dow 20,000, it shouldn't have any effect on your investment strategy.

Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Facebook Classic
  • Twitter Classic
  • YouTube Social  Icon

© Copyright 2020 Adams Financial Partners, Inc. Securities and Investment Advisory Services offered through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency), member FINRA/SIPC, a broker/dealer and a Registered Investment Advisor. Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services. Cetera is under separate ownership from any other named entity. The site is published for residents of the United States only. Registered Representative of Cetera Advisor Networks LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every representative listed. For additional information please contact the representative(s) listed on the site, visit Cetera Advisor Networks LLC site.  Adams Financial Partners, Inc. and Cetera Advsior Networks LLC are not affiliated.