Newspaper article Charleston Gazette Mail

Does the Dow at 20,000 Matter?

Newspaper article Charleston Gazette Mail

Does the Dow at 20,000 Matter?

Article excerpt

The Dow Jones Industrial Average came tantalizingly close to 20,000 on Jan. 6, a record level that is being closely watched (and hyped) by the financial media. At one point during the trading session, it was within 0.37 points, or 0.0002 percent. Most agree that it is just a matter of time before this milestone is attained. The longer-term significance, however, is subject to more debate.

Let's start by acknowledging that the DJIA is far from comprehensive when it comes to analytical content. The index covers a very narrow set of stocks and therefore is lacking in representation. Its calculation methodology also is problematic, placing way too much emphasis on the absolute share price, as opposed to market capitalization. As a result, a few names can move the index significantly - as has occurred recently with Goldman Sachs and JPMorgan Chase, which account for a substantial part of the upward surge since early November.

Nonetheless, the Dow is heavily mentioned when it comes to headline information about stock market performance. Moreover, it is not the only U.S. flirting with record levels. The more representative Standard & Poor's 500 and Nasdaq are at or near their all-time highs. Accordingly, assessing the implications of the hype about the Dow reaching 20,000 comes down to evaluating the volume of the signal, the influence on investing and business behaviors, and the implications for economic governance.

We should have little doubt about the signaling outcomes. Dow 20,000 will be the stuff of front-page headlines of both general- interest and financial newspapers, and will be a trending topic in social media. Photos of celebratory hats and banners will be published widely. And the majority of market professionals will remember where they were when this milestone was attained.

Many hope that all this will act as a catalyst for wider participation of the general population - and millennials in particular - in stock ownership. After all, a bigger investor base is the best contributor to a fundamentally healthy and less volatile market. The problem is that it may take a lot more than headlines and social media likes for this to happen. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.