20,000: Local investment experts expect stocks to continue rise

Arthur Cashin, director of floor operations for UBS Financial Services at the New York Stock Exchange, wears a Dow 20,000 hat, Wednesday, Jan. 25, 2017. The Dow Jones industrial average is trading over 20,000 points for the first time, the latest milestone in a record-setting drive for the stock market. The market has been marching steadily higher since bottoming out in March 2009 in the aftermath of the financial crisis. (AP Photo/Richard Drew)

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Arthur Cashin, director of floor operations for UBS Financial Services at the New York Stock Exchange, wears a Dow 20,000 hat, Wednesday, Jan. 25, 2017. The Dow Jones industrial average is trading over 20,000 points for the first time, the latest milestone in a record-setting drive for the stock market. The market has been marching steadily higher since bottoming out in March 2009 in the aftermath of the financial crisis. (AP Photo/Richard Drew)

The Dow Jones Industrial Average closed above the psychologically important 20,000 level Wednesday after crossing the milestone for the first time ever shortly after the markets opened for trading.

Many investors pointed to strong fourth-quarter earnings and President Donald Trump’s pro-growth initiatives as catalysts for the surge, which drove index of 30 of the nation’s largest companies up 155.80 points, or 0.78 percent, to close at 20,068.51 — the 18th record close for the Dow since Election Day.

Trump, who celebrated the milestone with one of his trademark tweets: “Great!#Dow20K”, has made a number of business-friendly moves since taking office Friday, showing his determination to make good on his campaign promises, including a pickup in infrastructure spending and a repeal of regulations and tax cuts.

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But the stock market gains can be attributed mainly to the tenor of Trump’s remarks rather than the details of the handful of executive actions he has signed, said Bill Wood, a certified financial planner with Adams Wealth Management Group in Centerville.

“I don’t think it was the specifics of the executive orders, it’s just that he’s made it very clear that it’s not going to be business as usual in Washington, and that has been generically viewed as overwhelming positive by Wall Street,” Wood said. “It’s clear that this is a broad-based, all-sector-participating rally.”

The so-called “Trump Rally” had begun to lose steam in recent weeks, with the Dow pulling back to close at 19,677.94 on Jan. 19 after closing within a point of the historic 20,000 mark on Jan. 6.

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But Trump’s actions since taking office — in addition to a slew of fourth-quarter earnings reports that show about 70 percent of S&P 500 companies beat analysts’ expectations — have helped reignited the post-election rally.

“The market was kind of meandering over the last 10 days, and I think that was the market saying let’s see how much (of Trump’s agenda) is real, and how much is hype,” Wood said. “The market is now saying it has reason to believe that the initiatives set forth by the Trump administration can be translated into economic growth.”

The Dow wasn’t the only index participating in the rally. The S&P 500 Index jumped 0.7 percent to a record 2,295.9,while the Nasdaq closed up 0.99 percent to a record 5,656.34 Wednesday.

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But experts were quick to point out that the stock market isn’t a measure of current economic conditions.

“You buys stocks based on what you anticipate them doing from this point forward,” Wood said. “Investors are saying that if Trump is successful, their companies could benefit.”

Still, the psychological importance of the Dow milestone should not be underrated, he added: “These kind of big milestones are foundational. Once the market is convinced that 20,000 is no longer that line in the sand, there tends to be an enthusiasm for staying above it. I don’t see us backing up.”

In addition to Trump, part of the reason for the optimism reflected the stock market has been the continued strengthening of the economy under his predecessor, Barack Obama. Over the past six years, the U.S. economy has added more than 15 million private sector jobs, and in November the unemployment rate hit 4.6 percent for the first time since August 2007, according to the U.S. Bureau of Labor Statistics.

The Federal Reserve cited improving economic conditions as the reason it raised short-term interest rates on Dec. 14 for only the second time in the past decade. Chair Janet Yellen said the hike was “a reflection of the confidence we have in the progress the economy has made, and our judgment that progress will continue.”

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