Dow Hitting 20K May Prove 'Meaningless'

Some experts say there's a lot of unwarranted hype over the milestone
By Jenn Gidman,  Newser Staff
Posted Jan 26, 2017 12:39 PM CST
A screen above the floor of the New York Stock Exchange shows the closing number for the Dow Jones industrial average on Wednesday.   (AP Photo/Richard Drew)

(Newser) – On Wednesday, the Dow Jones industrial average closed above 20,000 for the first time since it was established in 1896, leading to much fanfare … and just as much skepticism about the milestone's significance. Quartz, for example, calls hitting this benchmark "meaningless," offering a mathematical illustration—as well as an explainer about a "weird" figure called the Dow Divisor—that shows why we can basically "ignore the Dow" when it comes to assessing the overall economy. Other takes from around the web:

  • The New York Times lays out some basic facts on the numbers, noting that only 30 companies make up the Dow and that the percentage jump from 10,000 points to 20,000 isn't nearly as impressive as its climb to 1,000 for the first time, in 1972. A former Reagan budget chief calls this "the greatest sucker's rally in history" and the "greatest short of all time," predicting a plummet is heading our way.

  • Trump supporters are already singing "Hail to the Chief" for the numbers spike, but Slate says to keep the bubbly corked. It reasserts what Quartz and the Times are saying (namely, that the Dow isn't reflective of the economy as a whole) and notes the middle class isn't likely to reap major benefits from the event. As for Trump's personal finance blueprint: It simply hasn't had time to pan out yet, so he can't take the credit for this one.
  • The Australian Financial Review calls the development "fake news," claiming that no "sentient and sensible human being should base any investment decision on the Dow." It all comes down to the concept of "reflation."
  • The number that Forbes says we should be keeping our eyes on more than the "hype" over the Dow: the 30-year US Treasury yield.
(Read more Dow Jones stories.)

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