The Dow Jones Industrial Average gained 155.80 points or 0.78% to close at 20,068.51 on Wednesday January 25 to cross the historical 20,000 point. Investors, traders, and analysts can't afford to ignore the momentous rally of the Dow to cross the 20,000 point. To start with, the results of the 2016 U.S. Presidential elections in which Donald Trump emerged has POTUS provided the tailwinds that helped the Dow reach the 20,000 milestone in contrast to the predictions of a market crash.
This piece provides insights into how the global markets are faring with a view to drawing inferences on where the U.S. markets are headed.
President Trump is a market-moving phenomenon
Trump is probably the most controversial figure in the global political landscape right now and his controversial nature amplifies the effects that the actions and inactions of the POTUS can have on the financial markets. In the build up to the 2016 elections, many Wall Street analysts have submitted that a Trump presidency will unleash a new wave of uncertainty on the markets. Wall Street abhors uncertainty; hence, the prevailing opinion on Wall Street was that Trump's emergence as POTUS could cause U.S. markets to crash.
However, the markets didn’t crash as analysts had predicted and we have been seeing the elements of a decent rally in equities in the last couple of months. Interestingly, the Dow has found new bullish tailwinds to cross the 20,000 mark because President Trump has been moving to promote infrastructure projects and reduce regulation. Victor Alagbe, an analyst at TradePlus observes that "investors are more confident that Trump will follow through on his campaign promises to push business-friendly economic policies such as cutting taxes."
Global stocks rally as Dow reaches 20,000
The Dow is an icon in the global equities market because provides a snapshot of activities on Wall Street. Hence, it is not surprising that global equities are seeing a renewed rally as investors in other countries return to stocks because U.S. stocks are rallying.
To start with, stocks in Europe are moving up with gains as the ripple effects of the Dow's rally to 20,000 starts to pulse through the global markets. European stocks represented in the MSCI I All-Country World Index recorded gains to end the session at 1.5% off its record high.
The gain in global equities was even more pronounced in the indexes of specific countries. For instance, the UK's FTSE 100 gained 0.17%, France's CAC 40 was up 0.9&, and Germany's DAX climbed to a 20-year high. The gains also trickled down to Asia as China's Shanghai Index gained 0.31%. Hong Kong's Hang Seng and Japan's Nikkei 225 were also up 1.41% and 1.81% respectively.
How soon can the Dow reach 30,000?
The Dow has been in existence for some 120 years as an index of 30 stocks representing a snapshot of the U.S equity markets. It took the Dow almost 103 years to cross the 10,000 mark in 1999 but reaching 20,000 became reality 18 years later. The rally to 20,000 began in 2009 when the financial markets started to recover from the gloomy days of the global financial crisis.
Now that the Dow has reached the 20,000 milestone, investors will now be watching out for clues on whether the Dow will find support at 20,000 to breakout towards 21,000 or whether the index will break down below 20,000. The next couple of trading sessions will be crucial in determining the fate of the index. More importantly, investors will be watching out for clues on how soon the Dow will make its way up to 30,000.
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