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My Thoughts on the Dow’s Crossing of 20,000

The Dow Jones industrial average finally crossed the 20,000 mark this morning. It took the blue-chip average 64 days to make the 5.1% leap from when it first crossed 19,000 on November 22, 2016.

The big reason the move has received so much attention is 20,000 is a big, round number. As I explained a month ago, we’re drawn to 20,000, because it is recognizable and easy to remember. It looks big compared to previous milestones such as 5,000 or 10,000. It also gives market observers something to write about. For example, Schaeffer’s Research says the road to 20,000 incurred the largest number of days of the Dow sitting within 1%, of but not crossing, its next 1,000-point threshold since the average first crossed 10,000.

It’s an interesting tidbit, but it also shows just how bad we are at analyzing numbers. While going from 19,000 to 20,000 was just a 5.1% move, going from 10,000 to 11,000 was a 10% move. Every 1,000-point move to the next big, round benchmark will get smaller and smaller on a percentage basis. It’s just a 25% move from here to Dow 25,000 and a 50% move to Dow 30,000. While going from 10,000 to 20,000 was a 100% move, a similar upward percentage move from here will put the Dow at 40,000.

Taking the analysis to a smaller level, a daily 200-point move will now just be a 1% fluctuation. That’s right, 1%—nothing to even raise an eyebrow at.

Enjoy Dow 20,000. Even buy a Dow 20,000 baseball cap if you like, but take the number in stride. It’s just a number. So long as corporate earnings continue to grow over the long term, we’ll see much higher numbers in the future.

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