Newspaper article The Christian Science Monitor

Why Dow 10000 Smells No Sweeter Than, Say, 9999

Newspaper article The Christian Science Monitor

Why Dow 10000 Smells No Sweeter Than, Say, 9999

Article excerpt

Smart investors are supposed to pay attention to things like corporate earnings, industry trends, stock valuations, and the economy. But some investors seem unable to keep their eyes off big round numbers like 10000 on the Dow Jones Industrial Average (DJIA).

But is 10000 all that important? "It is not a barrier because we passed it," says Robert Shiller, an economics professor at Yale University. "But maybe it's more of a floor.... I think falling below 10000 is kind of a psychological downer, because 10000 does have some impact, in that it was a big deal when it went above 10000."

In the five years since the Dow first crossed that threshold in 1999, the closely followed index seems to have had trouble going very far above that level. The Dow did climb over 11000 in 2000 before succumbing to the bear market and pulling back.

Since then, the DJIA has moved back and forth across the 10000 threshold several times.

In December, it charged past the mark decisively and stayed above it until last Monday, when it sank to a 9990.02 close.

This pattern could persist for the next several years, but not because 10000 is some kind of psychological barrier, Dr. Shiller says.

"People are starting to worry about what will happen when the Fed raises interest rates," he says. "I think that is what has killed the market. It's just kind of a coincidence that it's back down to 10000."

Other experts tend to agree: "It's just a number," Jeff Molitor says of the 10000 figure. Mr. Molitor is a principal in the portfolio-review division at the Vanguard Group in Valley Forge, Pa. "Dow 10000 is no more particularly relevant than 7622 or 12958. The issue for investors is, over the long term, that they have the right asset allocation and, if they're looking at just the stock market, what's going to happen in terms of earnings and valuations."

Wrong focus?

"I think it's probably ridiculous to think that anybody with any experience in the market focuses on a number such as 10000," agrees Mark Sellers, a senior analyst at Morningstar Inc., in Chicago. "I can see where a lot of people might focus on it, but I think they tend to be the dumb money, not the smart money. …

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