The thing about Dow milestones

Thirty years ago today, the Dow Jones Industrial Average hit 2,000 for the first time ever. This reminder is particularly apropos as the DJIA has currently spent the last 20 days or so oscillating just below 20,000, coming within one (one!) point on Friday afternoon.

Here’s a bit of fun from a 1996 Wall Street Journal piece about what was being said back in 1987 as stocks began the year at 1895, ran through 2000 and then touched 2722 by August…

When the Dow industrials surpassed the 2000 mark, almost no one foresaw the pyrotechnics to come. The prevailing feeling was that, having climbed to 2000, the average would need to rest for a while.

Alfred Goldman of A.G. Edwards & Sons in St. Louis predicted “a victory celebration and then a headache.” New York money manager Robert Stovall predicted a “groundhog day” effect in which the market would “see its shadow, and promptly duck down again.” Mary Farrell of PaineWebber predicted a trading-range market hovering between 1800 and 2200.

Nor did many people guess at the time that three additional millenary milestones would fall within nine years. After all, it had taken the industrial average nearly 77 years to reach 1000, in 1973. Then it took nearly 14 years for the average to climb to 2000.

Of course, it’s easier and easier to hit each 1,000-point milestone, because each point gain becomes smaller on a percentage basis as the index rises.

Little did the commentators of the day realize that the massive rally in the first half of the year would eventually lead to the October crash that has lived on in infamy ever since. And little did the survivors of that 23% crash realize that the market would finish 1987 with a gain despite it!

And of course, they could never have known that within a decade or so, Dow 10,000 would be in sight, followed swiftly after by 11,0000 – and then a return trip back to the 6,000’s just a few years later.

The thing about major milestones for the Dow Jones Industrial Average – whether we’re talking about 2,000 or 20,000, is that they contain precisely zero useful information about what the future may hold. They’re fun to talk about and to celebrate, but they work terribly as buying or selling indicators.


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