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Dow Jones Tops 20,000 Points: What Does This New Milestone Mean?

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RANDY FREDERICK: After six weeks of consolidation, equities have finally broken out to the upside. Jeff Kleintop, Schwab’s chief global investment strategist, joins me for the January 26 Schwab Market Snapshot to discuss this event and what it means to investors. Welcome back, Jeff.

JEFF KLEINTOP: Great to be here with you.

RANDY: So, Jeff, with all the attention that’s being placed on this new milestone, investors might be getting a little worried that perhaps stocks are kind of expensive now that the Dow has passed 20,000. How do you respond to this?

JEFF: Yeah, and it’s not just the Dow. We’ve seen a global move higher in stock markets around the world. But, look, just because stocks have hit new highs doesn’t mean they’re necessarily expensive. We measure value not on price alone, but relative to things like earnings, or assets, or book value. So as long as the economy and earnings continue to rise stocks can too.

RANDY: Well, you know, after 17 years in the making, virtually every financial publication has this as their headline right now. But does Dow 20,000 really mean anything or is it just another big, round number?

JEFF: Well, you know, it’s a big number, it has some psychological importance. Most of the way, though, to 20,000 was powered by corporate share buybacks. And make of that what you will, but in the last couple of months the final push was driven by individual investors buying stocks for the first time in a couple of years. And Dow 20,000 may further that trend as investors—maybe it’s a focus on, it’s kind of a reminder of maybe what they didn’t participate in as much as they could have if they held a lot of cash in the last year or two.

RANDY: Well, a lot of this has been made about the post-election rally, and that it’s all just all about expectations about the Trump Administration. How much does this Dow 20,000 really—is it—how much is based on hope and how much is based in reality?

JEFF: Well, you know, I think it was political strategist James Carville back in ’92, who coined the phrase, “It’s the economy, stupid.” And I think that applies to today. Look, what’s happened is certainly tied to politics to some degree. The newspapers talk about everything being tied to what’s going on in Washington. But, look, as I see the market, the data has been tracking actual economic data. Stocks have been moving up in lockstep with the Citigroup Economic Surprise Index. Now, that moves higher when economic data exceeds expectations, and that’s been the case. So, you know, I don’t think the market has gotten too ahead of itself here. Certainly, there are political and economic risks to the market—there always are. But to say that the market is all about hope and disconnected from reality would be to ignore the data.

RANDY: Well, there’s little doubt that the economic backdrop was already showing signs of improvement even before the election. But isn’t some of this rally, at least some of it, based on expectations and Trump’s campaign promises?

JEFF: Well, we can see some of that in maybe some of the sectors that have led the market higher. Two of the sectors that have led the way, Materials and Industrials, benefit from the infrastructure spending programs that Trump has talked about. But two of the sectors don’t—Tech and Consumer Discretionary—also two great performing sectors, they may actually be hurt by some of Trump’s trade proposals at least in the near-term. So: yes and no. I guess what all four of these sectors have in common is that they’re all tied—they all benefit from faster global economic growth. I think that’s the real common denominator here.

RANDY: Well, that’s all the time we have. As always, Jeff, thank you for sharing your perspective with us. You can read more from Jeff in the international investing section of, and you can follow Jeff on Twitter @JeffreyKleintop. You can also follow me on Twitter @RandyAFrederick. We’ll be back again. Until next time, invest wisely. Own your tomorrow.

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Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

The Citigroup Economic Surprise Index is an objective and quantitative measures of economic news. It is defined as weighted historical standard deviations of data surprises. A positive reading of the Economic Surprise Index suggests that economic releases have on balance beaten consensus. The index is calculated daily in a rolling three-month window.


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