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Dow Jones Crosses the Critical Psychological Barrier
The Dow Jones Industrial Average (DJIA) finally crossed the 20,000 mark on January 25, 2017, sending investors into a frenzy and giving further wings to the Trump rally. The DJIA closed at 20,068.51 on Wednesday after hovering around the 19,000 level since November.
The current stock market rally began with the surprise election win of Donald Trump in November last year. Soon after the win, Trump made certain announcements that fueled investor and business optimism.
He vowed to increase government spending and build infrastructure for economic growth. Trump added that a number of regulations were stifling American businesses, so he would be easing them substantially. Most importantly, he said that he planned to cut taxes across the board. Such promises helped the Dow Jones Index breach the 20,000 barrier.
Donald Trump’s Impact on Sectors
Almost all the sectors were impacted by Trump’s announcements as he kept on emphasizing his pro-business policies.
Despite the open criticism of certain technology companies in his election campaign, Donald Trump promised that he will provide incentives to companies if they move manufacturing to the United States. He further added that he would provide tax incentives to bring back overseas cash held by technology companies and also lower corporate taxes. Such promises brought some cheer back to the technology sector, which missed out on the Trump rally early on.
Apple Inc. (NASDAQ:AAPL) stock made a good comeback since last year, when Trump had warned the company not to outsource “iPhone” production to China.
Trump promised to not only lower corporate taxes, but also reduce taxes across the board, especially for working and middle-income Americans. This would mean putting more money in the hands of consumers to spend.
Higher economic growth, combined with more disposable income, boosted the prospects of stocks like Walt Disney Co (NYSE:DIS), which has been one of the top gainers in the Dow Jones since Donald Trump won the election.
Trump promised to invest heavily in infrastructure, which meant more investments, more jobs, and higher economic growth. This boosted construction equipment stocks like Caterpillar Inc. (NYSE:CAT).
Trump did not stop here; he also made promises to ease regulations and make the country a very business-friendly place. The pharmaceutical sector, which had been in the spotlight over high drug prices, turned upbeat, thereby buoying stocks like E I Du Pont De Nemours And Co (NYSE:DD) and Pfizer Inc. (NYSE:PFE).
The prospects of higher economic growth implying higher interest rates, coupled with loosened regulations, made the financial sector very attractive for investors. Goldman Sachs Group Inc (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and American Express Company (NYSE:AXP) turned out to be some of the top gainers of this Trump rally.
Thus, industrial and financials stocks played a large role in the Dow Jones Index crossing the 20,000 barrier.
The table below shows the movement of Dow components since the election day, showing the top gainers.
| Symbol | Name | Nov. 7 (CP in $) | Jan. 25 (CP in $) | % change |
| DJI | Dow Jones Industrial Average | 18259.6 | 20068.51 | 9.91% |
| GS | Goldman Sachs Group Inc | 181.48 | 237.25 | 30.73% |
| JPM | JPMorgan Chase & Co. | 69.88 | 86.03 | 23.11% |
| CAT | Caterpillar Inc. | 83.75 | 98.15 | 17.19% |
| BA | Boeing Co | 143.03 | 167.36 | 17.01% |
| AXP | American Express Company | 67 | 76.89 | 14.76% |
| IBM | International Business Machines Corp. | 155.72 | 178.29 | 14.49% |
| DIS | Walt Disney Co | 94.43 | 108.04 | 14.41% |
| UNH | UnitedHealth Group Inc | 141.93 | 161.24 | 13.61% |
| TRV | Travelers Companies Inc | 105.36 | 117.67 | 11.68% |
| HD | Home Depot Inc | 123.75 | 137.48 | 11.09% |
| AAPL | Apple Inc. | 110.41 | 121.88 | 10.39% |
| DD | E I Du Pont De Nemours And Co | 69.51 | 76.67 | 10.30% |
| CVX | Chevron Corporation | 106.85 | 117.24 | 9.72% |
| INTC | Intel Corporation | 34.69 | 37.8 | 8.97% |
| MCD | McDonald’s Corporation | 112.82 | 121.79 | 7.95% |
| UTX | United Technologies Corporation | 103.05 | 110.96 | 7.68% |
| NKE | Nike Inc | 50.91 | 53.86 | 5.79% |
| MSFT | Microsoft Corporation | 60.42 | 63.68 | 5.40% |
| VZ | Verizon Communications Inc. | 47.46 | 49.77 | 4.87% |
| MMM | 3M Co | 169.74 | 176.73 | 4.12% |
| GE | General Electric Company | 29.31 | 30.37 | 3.62% |
| PFE | Pfizer Inc. | 30.38 | 31.29 | 3.00% |
| MRK | Merck & Co., Inc. | 60.05 | 61.08 | 1.72% |
| V | Visa Inc | 82.51 | 83.9 | 1.68% |
| PG | Procter & Gamble Co | 86.56 | 87.16 | 0.69% |
| XOM | Exxon Mobil Corporation | 85.45 | 85.34 | -0.13% |
| CSCO | Cisco Systems, Inc. | 30.94 | 30.7 | -0.78% |
| KO | The Coca-Cola Co | 42.46 | 42.12 | -0.80% |
| JNJ | Johnson & Johnson | 116.66 | 112.8 | -3.31% |
| WMT | Wal-Mart Stores Inc | 69.78 | 66.89 | -4.14% |
*CP=Closing Price
Dow Jones Industrial Average: What’s After 20,000?
Going forward, most investors are cautiously optimistic and looking at more clarity on Donald Trump’s trade policies, which are being considered as protectionist and not positive for the economy in the long term. So it is wait-and-watch time for the stocks and the Dow Jones Industrial Average.
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