After six weeks of flirting with the 20,000 benchmark and almost 18 years after crossing 10,000, the Dow Jones Industrial average finally broke above 20,000 on Wednesday.
Donald Trump took the credit and his team were quick to claim it’s the “Trump effect”, ignoring the 148% gain in the index during Barack Obamas’ presidential term.
The rotation from bonds to equities and from defensive stocks to cyclicals resumed after a one month break, suggesting that optimism about reflation and growth are currently outweighing fears of protectionism.
Round numbers are psychological and very exciting for many investors, especially for those left behind who didn’t participate in the most recent rally. Is it time to join the party?
I believe that when an index crosses a new benchmark, it plays as a reminder that stocks go up overtime and if you’re a long-term investor you should be well diversified and let the dollar cost averaging do the magic for you. However, if you’re joining the rally just because of the high-adrenaline then you should maybe think twice.
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