The Historic Milestone of the Dow Jones Industrial Average Crossing 40,000: A Journey Through Time
The Dow Jones Industrial Average (DJIA) or simply “the Dow,” reached an unprecedented milestone on Friday, February 26, 2021, as it closed above the 40,000 mark for the first time in its 139-year history. This significant achievement came after a brief flirtation with this milestone earlier in the week that saw the index fall short.
The surge in the DJIA can be attributed to renewed optimism regarding potential interest rate cuts from the Federal Reserve, which would ease monetary conditions for consumers and businesses. The recent Bureau of Labor Statistics report indicated that inflation may be starting to ease, increasing the likelihood of rate cuts in the near future.
Ryan Detrick, Chief Market Strategist at Carson Group, shared his perspective on this historic milestone: “40,000 is a great milestone, but end of the day there isn’t much difference between 39,999 and 40k. However, this is a reminder of how far we’ve come.”
Detrick emphasized the resilience of investors who remained steadfast despite numerous calls for recessions and bear markets throughout history. He added, “Investors who were patient and ignored all the scary headlines were once again rewarded.”
All major indexes closed the week in positive territory, with the DJIA rising 134 points, or 0.3%, to a record high of 40,003.59. The S&P 500 and Nasdaq Composite posted smaller gains and losses, respectively.
The significance of crossing the 40,000 mark may not hold much practical value for investors but does capture public attention and potentially bolsters optimistic sentiment beyond Wall Street. Art Hogan, Chief Market Strategist at B. Riley Financial, explained the importance of these round numbers: “It brings Wall Street news to Main Street and serves as an affirmation that corporate earnings are growing and investor confidence remains robust.”
For many Americans, “the Dow” represents the stock market. The index’s small collection of companies – from Microsoft to McDonald’s to Chevron – are widely held by both retail and institutional investors.
Join us as we retrace the Dow’s historic journey to 40,000:
Dow is formed (1896): The first daily close, on May 26, 1896, was at 40.94. The Dow’s inauspicious beginning saw it plunge to an all-time low of 28.48 by August that year.
Dow 100 (1906): The Dow first closed above 100 in January 1906, marking a remarkable recovery from the index’s all-time low during Theodore Roosevelt’s presidency. The Federal Reserve would not be established until seven more years had passed.
Crash of 1929: On October 28, 1929, the Dow declined by 38 points, and an additional 31 points on October 29. While these drops may not seem significant today, they represented back-to-back declines of 13% and 12% of the index’s value – two of the worst one-day percentage declines in history.
Dow 1,000 (1972): The Dow first crossed the 1,000 mark on November 14, 1972, during Richard Nixon’s re-election campaign. Its components, which had been stagnant for 13 years, included Woolworth, Eastman Kodak, and International Nickel.
Crash of 1987: On October 19, 1987, the Dow plummeted by a staggering 508 points – a 23% decline. This remains the largest one-day percentage decline in history, although it was short-lived as the Dow returned to pre-crash levels within a year.
Dow 10,000 (1999): The “irrational exuberance” of the tech bubble saw the Dow gain 1,000 points in less than a year to reach this benchmark on March 29, 1999. It continued its ascent by gaining another 1,000 points in just the following month.
Dow 30,000: The Dow’s current bull market has seen remarkable growth, and many analysts predict that the index could reach this milestone within the next few years. However, it is important to remember that each new record comes with its unique set of challenges and risks. As investors, we must remain vigilant and informed as we navigate this exciting time in the market’s history.
