March 29, 1999: 10,006.78
February 3, 2017: 20,071.46
November 24, 2020: 30,046.24
On Tuesday, the Dow Jones Industrials closed over 30,000 for the first time ever. From the numbers above, it's easy to see how fast the 30 select stocks (the makeup of which changes fairly frequently these days) comprising the Average has galloped from one giant number to the next.
On May 26, 1896, two financial reporters, Charles Dow and Edward Jones, first published their average.
It consisted of 12 companies:
...all of which, with the notable exception of General Electric (GE, consequently, not part of the current roster) have been gobbled up, picked apart, merged, liquidated or somehow morphed into some other corporate entity.
So, it took nearly 103 years for the Average to go from the first published value of the Dow Jones, 40.94, which was calculated by taking the average market price for the 12 companies, to 10,000, obviously changing the formula along the way.
Just as a side note, if one were to use the same formula as the originators, simply taking the average price of each of the now 30 component stocks, the number would be - just guessing - somewhere around 120, but that would hardly get anyone excited. Does anybody really want a hat that reads "Dow 100?" Probably not.
Perhaps it's worth taking note of the original calculation of a simple average, but the genius of simplicity is a discussion for another time. Today, we're focused on how fast we can reach the next big number, 40,000.
After bouncing above and below that 10,000 mark for a short time, and, notably dipping below it in 2000 on a number of occasions and then for an extended period of time before and after the tragic events of 9/11/2001, falling as low as 7,286.27 on October 9, 2002, the Dow recovered and was off to the races, well, kind of...
until the sub-prime crisis crashed it all the way down to 6,547.05 on March 9, 2009, the day otherwise known as the "Haines Bottom" after CNBC anchor, Mark Haines (RIP), correctly called the stock market bottom on that very day prior to the open (see video below).
So, then, finally, the Dow was off to the races, crossing again over 10,000 to the upside on October 14, 2009, to eventually reach the legendary level of 20,000 in 2017. Thus, depending on perspective, the Dow took either 19 years (1999-2017) to go from 10 to 20,000, or eight (2009-2017). Either way, it was done in fairly short order, doubling in value.
The next step, from 20,000 to 30,000, took less than four years (3 years, nine months, and 21 days) to complete. While the value of the Average only increased by 50% instead of the 100% in the previous epoch, the move is no less impressive. Mathemeticians may note that at the current trajectory, 40,000 should be within striking distance in about 2 years and 8 months, or roughly speaking, July 17, 2023.
A calculation done on the internet returned a result of 58 years, with this note:
The next number for given series 103,19,4 is 58
General polynomial is 34.5x2-187.5x+256
...whatever that means.
So, for the true pessimists out there, according to at least one website’s calculator, the Average won't hit 40,000 until 2078. The best guess is that it will hit the magic 40,000 mark (and there will be hats available, promise) somewhere between 2023 and 2078. Understand that it is a smaller and smaller percentage gain every 10,000 points. The value of the Dow Average will only gain by 33.3% on a move from 30,000 to 40,000, so doing it in under three years is actually not improbable.
Just to amplify the idea that nothing in the financial world goes up or down in straight lines, as we saw with the bumpy road between 1999 and 2009 (aka, the lost decade), a couple of points:
Back in the world of the real or imagined (take your pick), presumptive president, Joe Biden, has apparently chosen former Chair of the Federal Reserve, Janet Yellen, as his presumptive Secretary of the Treasury. Yellen, an uber-dove on monetary policy, is likely to empty the treasury with the same abandon she promoted easy money when Fed Chair. The skies will open up and twenties will fall from the heavens.
Oil prices have skyrocketed above $45 per barrel for WTI crude, the highest price since early March of this year. It's probably nothing more than the idea that, opposed to the whole lockdown COVID preaching, many families are traveling over the Thanksgiving holiday, so the oil companies want to get an extra piece of pie. It could be more than that, but it's a good bet that oil prices will fluctuate between $40 and $48 until Christmas and then stabilize near or below that range in 2021.
With stocks booming, a little money leaked out of treasuries, with the 10-year note and 30-year bond yields both higher, by two and four basis points, respectively.
Markets are closed on Thursday, and a half-day session (close at 1:00 pm ET) is scheduled for Friday, so Wednesday is the last full trading day of the week, November closing out the month on Monday. With that, the Labor Department moved it's reading on initial unemployment claims to today, noting 778,000 new unemployment claims in the most recent week.
Happy Thanksgiving!
At the Close, Tuesday, November 24, 2020:
Dow: 30,046.24, +454.97 (+1.54%)
NASDAQ: 12,036.79, +156.15 (+1.31%)
S&P 500: 3,635.41, +57.82 (+1.62%)
NYSE: 14,249.50, +251.26 (+1.79%)
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