Dow Jones smashes through 20,000

At last, it's done it. The Dow Jones has made history, smashing through the magic 20,000 level for the first time. Records have fallen like confetti on Wall Street in recent months, but it seemed the 'big number' would prove elusive after a post-inauguration sell-off. Not so, following a round of upbeat corporate earnings Tuesday and again today.

"It's never wrong to be long", they say in City circles and, as proof once again that you just can't predict this market, the Dow Jones opened in virgin territory around 100 points higher, quickly registering a best of 20,069. And it could keep going.

Experts have been calling the end of this bull market for many months now, and over the past few weeks it looked like they may have a case. But it seems the Trump trade still has legs, something that our technical analyst Alistair Strang said less than two weeks ago.

While it's easy to dismiss big numbers like this in terms of their significance, they do matter, and, in this case, a break above 20,000 shows that traders happy to go short at this psychological level for the past few months have given up.

And the latest boom is at least partly down to some positive surprises during this US earnings season.

Jet manufacturer Boeing did well, beating quarterly profit forecasts and predicting that deliveries of commercial airplanes will increase this year.

That's why it's one of eight out of the 30 Dow constituents that's hit a one-year high Wednesday. For Boeing, Visa and Microsoft this is record territory.

Results from United Technologies were closely watched midweek, although meeting expectations failed to offset concerns elsewhere at the maker of shopping mall elevators and owner of aircraft engine giant Pratt & Whitney.

However, it's largely Trump's rally. The Dow is now up 12% since 4 November and has knocked off over 1,000 points in just two months. Incredibly, President Trump's promise to loosen regulation governing Wall Street has investment bank Goldman Sachs up 29% since he won the election. JP Morgan is up 22%.

According to the Wilshire 5000 index, around $2 trillion had been added to the value of America's listed companies since 8 November.

Likely tax cuts and a perhaps less-likely $1 trillion of infrastructure spending are clearly potential catalysts for American business. Signing executive orders backing two controversial oil pipelines – the Keystone XL and Dakota Access projects – was yesterday taken as a sign that Trump is as good as his word.

But the optimism stretches far outside the Dow 30. The broader S&P 500 today hit a new best at 2,294, and the tech-dominated NASDAQ Composite hit another record at 5,643.

Big question now is when to sell. It's a real investment conundrum as no-one wants to sell way too soon, but also don't want to be left holding the baby when it all goes wrong. And it will at some point.

US money manager Lance Roberts turned bearish last year. "With the markets, and the economy, currently pushing the historical limits of time and distance, the reality of an unexpected mean-reverting event has risen in recent months," he said recently.

But he's been smart and kept his client's cash invested, admitting that despite his own concerns a correction may not occur immediately, or even within the next few months.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.