Watch the video for a discussion about the Dow Jones Industrial Average 40,000 milestone. Doug and Lee examine the historical context and current factors driving today’s growth. The conversation highlights the impact of a few companies, the value-weighted nature of the index, and the role of high-dividend stocks. Both Doug and Lee express skepticism around reaching new milestones any time soon.
Transcript:
Dow 40,000. I mean, in my lifetime, it’s been below 5,000.
I think at one point in the financial crisis, it collapsed. I think it was below 10.
It was.
What’s the driver of this? Is it a small number of stocks or is it 30 companies?
Well, it is a small number. And remember, it was only 25 years ago when they were tossing the red hats that said Dow 10,000 in 1999.
And, you know, it’s a smaller index. And remember, there was authors then putting out Dow 30,000 and Dow 35,000 books.
And, you know, Wall Street was going, oh, or the skeptics were going, no, that’ll never happen. And then, of course, it does come to fruition.
But when you only have 30 stocks and you have some that are tech names that have become a lot bigger in that 25 years, I think that’s what drove it to some degree.
So maybe you could explain, people think it’s 30 stocks, each one would be valued equally. But the fact of the matter is, it’s not that way at all.
No. Well, they’re value-weighted based on market cap. So that plays a part in it, of course. And then, of course, you have a reasonably significant amount of the stocks pay a good dividend.
So people are always rooting for the dogs of the Dow, which are the five or 10 highest yielding stocks, which means they’ll be the lowest price stocks because yields move inverse to stock price.
So I think it’s been, you know, an overall index move, but there’s been names that were added in say the last 10 and 15 years that really juiced it in a big way.
If you look at the investing community, when you hit these important milestones, how many people say it’s gone too far, particularly when the number of years…
ALERT: Take This Retirement Quiz Now (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
The post This Is Driving the Dow’s Surge to 40,000 appeared first on 24/7 Wall St..
Click this link for the original source of this article.
Author: Austin Smith
This content is courtesy of, and owned and copyrighted by, https://247wallst.com and its author. This content is made available by use of the public RSS feed offered by the host site and is used for educational purposes only. If you are the author or represent the host site and would like this content removed now and in the future, please contact USSANews.com using the email address in the Contact page found in the website menu.