A television screen displays the news Wednesday as the Dow broke 20,000. The index of 30 leading stocks has tripled in the past eight years. (AP Photo/Richard Drew)
Photo: Richard Drew
Photo: Richard Drew

Bull run: ‘Giddy’ Dow breaks 20k

The Dow Jones Industrial Average, a closely watched gauge of the stock market, crossed over 20,000 Wednesday for the first time in its 120-year history.

Atlanta-area money managers say the milestone is the result of investors’ mass optimism that President Donald Trump will be able to make good on campaign promises to rev up the economy with higher infrastructure spending, lower taxes and fewer regulations.

But it also caps a monumental rally since the Great Recession, when the Dow bottomed out at 6,547 in March 2009.

The Dow closed Wednesday just above 20,068, up 155 points or about .8 percent on the day.

The benchmark index has surged nearly 10 percent since the election, though the rise had stalled and fallen back a bit in recent weeks. Then, this week, with Trump in office and vowing to rewrite trade agreements and revive pipelines, the markets began to rev again.

Aradhana Kejriwal, chief investment officer at JOYN, a Sandy Springs firm with $1.2 billion under management, believes investors have gotten too optimistic at a time when stocks are already pricey.

“I think the market is emotional and very giddy,” said Kejriwal, whose firm bills itself as the first behavioral wealth management firm in the nation. Trump’s policies “are not even clear and we don’t even know if they’re going to be implemented, or when,” she said.

“We caution investors that market sentiments can change on a dime,” she warned.

The Dow is a tiny fraction of the stock market — an index of only 30 large publicly traded companies. By itself, the Dow topping 20,000 has more symbolic than practical value.

But the broader Standard & Poor’s 500-stock index and the tech-heavy Nasdaq composite index have also been trading at record levels. The recent run-up in stock prices has added about $1 trillion in market value since the election to companies that make up the S&P 500.

That means fatter 401(k)s and portfolios for millions of workers and retirees.

Banks and other financial companies posted the biggest gains on Wednesday. Wells Fargo jumped 3.7 percent.

Industrial companies also rose sharply. Boeing surged 4.2 percent, the biggest gain in the Dow.

Several Georgia-based companies finished the day at or near record highs, including UPS, Delta Air Lines, Mohawk Industries, Veritiv and HD Supply.

Dow 20,000 is “a psychological milestone, if anything,” said Michael Merlin, managing director at Hansberger & Merlin, Morgan Stanley’s Atlanta money management unit for wealthy individuals.

But how and when it happened still points to a shift in the market, he added.

Despite more than tripling since the depths of the Great Recession, he said, “this has been one of the most unloved markets” because investors have been skeptical that companies could maintain the profit growth that underlies stock prices.

Since Trump’s election, he added, investors seem optimistic that many companies will be able to boost growth, pay less in taxes, and bring overseas profits home to reinvest in their businesses or to pay out to investors.

“Clearly Trump’s policies are being looked at as positive,” he said. But some of Trump’s proposals, such as heavy deficit spending from simultaneous tax cuts plus big public infrastructure investments, could hurt the markets by driving up interest rates and inflation.

A more protectionist trade stance also worries some investors.

“It’s not all positive,” he said.

Robert Willis, president of Willis Investment Counsel, said the post-election surge isn’t just about the stock market. It could be a sign of better days ahead for the broader economy.

“I believe there is a growing belief that a more pro-business White House could stimulate more economic activity,” said Willis, whose Gainesville firm manages about $2 billion for pensions, endowments and wealthy families and individuals.

He said Trump’s election has fostered more optimism among businesses that could prompt them to take on more risk and take advantage of low interest rates to borrow and expand.

The famous economist John Maynard Keynes referred to such spontaneous mass optimism as “animal spirits,” Willis noted. “Perception and psychology can be very powerful,” he said.

— The Washington Post and AP contributed to this report.

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