Stock markets reach new heights
Dow Jones industrial average eclipses another milestone, closing above 24,000 for the first time.
One of the longest stock market booms in history continued its gravity-defying ascent Thursday, with investors cheering the prospect of deep corporate tax cuts and the rollback of government regulations under President Donald Trump.
The Dow Jones industrial average eclipsed yet another milestone, closing Thursday above 24,000 for the first time. And the Standard & Poor’s 500 index logged its 13th straight month of gains, the longest such streak in history.
Stock markets have been going up, more or less without interruption, since March 2009, the end of the acute phase of the global financial crisis. This 8½-year bull market is the second-longest in history, behind only the rally that lasted from 1987 until 2000.
Investors are embracing Trump’s procorporate presidency, marked by the promise of lower taxes, the installation of former industry executives in key government agencies, and the repeal or relaxation of rules that have made it hard for some big businesses to expand without fear of interference from Washington.
Indeed, the view is taking hold that Trump, in so aggressively promoting policies aimed to stoke the economy and financial markets, has unleashed animal spirits — largely absent under President Barack Obama — that are now reflected in ever rising consumer confidence indicators and a willingness to embrace risk in the stock market.
“It comes down to psychology, and the psychology today is that everything is awesome,” said Charlie Bilello, a stock market historian at Pension Partners. “Jobs have grown for 85 straight months, you have growth in corporate earnings, and you have tax cuts.”
This week’s rally was sparked by a smattering of good news. Strong economic signals showed consumer confidence at a nearly 17-year high. Retailers posted promising results as the holiday shopping season kicked into gear.
More than anything, enthusiasm about life being more pleasant for corporate America is propelling stocks. This week, investors were thrilled by the signs that a normally dysfunctional Washington is coalescing around a tax-cut package that would go straight to the bottom line of businesses and their owners.
Of course, there is no guarantee the tax-cut package will become law. That is a potential tripwire for markets.
“If the tax reform doesn’t get done, I think there will be a pretty sharp correction,” said Bruce Van Saun, chief executive of Citizens Financial Group, one of the largest banking companies in the northeastern United States.
Van Saun said stock markets could plunge as much as 15 percent if the tax cut gets derailed. “I think it’s quite pivotal right now,” he said. “The businessperson has an expectation that this will get done.”
In a year of market records, hitting the 24,000 mark is not the most historic. This was the fifth 1,000-point milestone for the Dow this year; it first hit 20,000 on Jan. 25. The latest large round number — surpassed after the Dow jumped 1.3 percent Thursday — arrived barely a month after the previous landmark.
These milestones, of course, are arbitrary. Passing a round number in a particular index isn’t itself significant.
But the ease with which the barrier was cleared highlights the extent to which investors are willing to look past geopolitical uncertainty and pricey stock valuations and bet that the market will keep going up.
“People are assuming this is normal — but it is not,” Bilello said. “The relationship between risk and reward has broken down.”