The Dow was at it again Tuesday, briefly soaring past the 26,000-point mark for the first time — but investors could’ve used seat belts for this roller-coaster ride of a day.
The ride may not be over, either, as analysts suggested the Dow Jones Industrial Average stock index could see more gains in the months ahead as investors and traders fixate on the distant goal of topping 30,000 points. They may have the wind at their backs as tax reforms mean U.S. businesses and many taxpayers are poised to keep more of their money in 2018.
Before shedding all of the day’s gains, the Dow briefly reached an all-time high of 26,086.12 on Tuesday. It was the index’s second 1,000-point milestone this year, and it came in record time — just seven trading days after the bellwether stock market gauge first crossed the 25,000-point mark.
“The Dow’s performance in the first two weeks of 2018 has been nothing short of breathtaking,” said Jesse Cohen, senior editor at Investing.com. “The gains have been made thanks to optimism over the Republican tax cut and hopes it will boost corporate profits and provide a fresh spark to the economy. I see more gains ahead, with the Dow hitting 30,000 only a few months away.”
The pace at which the Dow made it to 26,000 looks even more impressive when considering that the Dow’s previous record for a 1,000-point gain was 23 trading days between Nov. 30, 2017 and Jan. 4, 2018.
As trading progressed Tuesday, investors engaged in some profit taking, and the Dow slipped back below 26,000 to close at 25,792.86. However, even though the index ended the day in the red, Tuesday’s milestone stood out as part of a white-hot winning streak during the 14 months since the election of President Donald Trump.
In 2017, the Dow rose almost 5,000 points, and it is up by 4.3 percent since 2018’s trading began on Jan. 2.
“What was working last year is, to a large extent, working this year, ” said Jonathan Golub, chief U.S. equity strategist at Credit Suisse. “Last year, we experienced a broad global recovery, and economic data was pretty much better everywhere in the world. Small business gauges, consumer confidence surveys, economic indices and earnings trends have been good. It’s really been extremely broad.”
Golub also echoed Cohen’s thoughts about the impact the recent tax bill is expected to have on the economy for both consumers and businesses.
“The average family is supposed get about $2,000 extra this year that they can spend on things they might not have spent on before,” Golub sad. “Corporate tax rates will come down and that means business have more more to buy back stock, increase dividends and reinvest for future growth. There’s an ‘everything is working’ narrative going on.”
Golub said that while investors have had many reasons to be happy with Wall Street of late, “The risk to this is that, at some point in time, wage inflation will come around and put some cold water on the fire.”
Wage gains haven’t risen as quickly as the stock market, but companies will eventually need to begin boosting salaries, and that will have some impact on earnings, he said.
However, Golub added that such a situation, “definitely won’t happen in the first six months, or longer in 2018.”
Then there is the wealth that the stock market has given to some of the best-known corporate founders and chief executives.
According to Bloomberg’s Billionaire’s Index, since the start of the year alone: Amazon CEO and founder Jeff Bezos has become the richest person in the world, as his net worth has surged by $10.7 billion to $110 billion. Microsoft co-founder Bill Gates’ fortune has grown by a relatively paltry $1.99 billion, to $93.8 billion over the first two weeks of trading this year. Facebook CEO and co-founder Mark Zuckerberg has also had a good year, as his net worth is up by $1.21 billion, at $74 billion.
Tech stocks have been one of the major forces behind the Dow’s record-setting gains, but on Tuesday the majority of the local Dow components mirrored the index’s early gains and its eventual mild retreat.
Among Bay Area stocks that make up the Dow’s 30 companies, Apple slipped Tuesday by 0.5 percent to $176.19 a share, giving it a market capitalization of almost $896.3 billion. Intel shares gave up 0.2 percent to end the day at $43.14, and Cisco Systems’ shares pared back by 0.8 percent to finish trading at $40.54.
Chevron shares fell by 1.2 percent to close at $132.01, while Visa shares managed a gain of 0.3 percent to end the day at $120.39.
