The Dow Jones Industrial Average has hit a historic milestone, breaching the 40,000 mark for the first time. This achievement comes on the back of investor optimism surrounding the potential impact of artificial intelligence on corporate profits and the possibility of the Federal Reserve cutting rates due to easing inflation pressures.
The Dow’s climb to this significant level has been far from straightforward. Reflecting on its trajectory over the past 20,000 points offers a glimpse into the index’s resilience and volatility. In early 2017, the Dow closed above 20,000 as investors anticipated lower corporate taxes during Donald Trump’s presidency. This sentiment propelled the index even higher, surpassing 25,000 by January 2018. However, challenges arose in 2018, with trade tensions between the U.S. and China, coupled with rate hikes by the Federal Reserve, causing the Dow to retreat by over 5% by year-end.
Surviving Challenges
Despite the setbacks faced in 2018, the stock market rebounded in 2019 as the Fed shifted away from its tightening monetary policy. The Dow’s climb continued into early 2020, nearing the 30,000 mark before the Covid-19 pandemic struck. The ensuing market turmoil saw the Dow plummet by 38% from its peak in February 2020 to a low point in March. However, swift action by central banks and governments, along with progress in vaccine development, helped the Dow recover. By November 2020, the index had breached 30,000 for the first time.
The momentum from the lows of the pandemic carried forward into 2021, propelling the Dow past 35,000. Yet, the index faced headwinds as a bear market led to a significant drop, pushing the Dow down to around 28,660.51 before it rebounded. Despite the challenges, the Dow has managed to surge by an impressive 40% from its recent low, showcasing its resilience and ability to weather storms.
The Dow Jones Industrial Average’s journey to surpassing 40,000 underscores the index’s ability to navigate through uncertainty, volatility, and external shocks. The milestone serves as a reminder of the market’s capacity for resilience and recovery, offering investors insights into the enduring strength of the U.S. equity market.