Big Deal

The Dow broke 20,000 this week. Yay! That’s lovely and all, but what does that actually mean to investors.

What it means

  • The market goes up over time – This is a reinforcement of why we invest in equities for the long term. Because of inflation and earnings growth, good companies will increase in value.

  • Sentiment is good – the market “proving” to people that it can blaze new paths to new and exciting places. This tends to be a pick-me-up for investors who may have been fearful. This has historically been positive in the short term

What it doesn’t mean

  • That there is any predictable movement after a milestone – lest we be reminded that the market isn’t fond of people telling it what to do.

Not to rain on any parades, but a number is just a number. It has very little, if any, technical meaning to the market, but it does cause noise that can affect short term movement. I will say that some positive noise is nice for once.

While outlooks are good it’s hard to tell if the market and economists are getting ahead of themselves, and it doesn’t really matter. What does matter is that we continue to understand the need and tolerance for risk in our investments and not let ourselves be swept away into the trend of the day.

*Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions.