Wall Street’s rise has been largely fueled by strong corporate profits, global economic strength and Republican efforts to cut taxes and curb regulations. Most recently, market analysts have raised their profit expectations for dozens of companies after the passage of a massive tax bill late last year that lowered the corporate tax rate to 21 percent from 35 percent. The law is expected to be a major boost for shareholders as corporations divert their tax savings to buying back their stock, which would raise its price, or issuing dividends.
For the Dow, encompassing 30 large publicly traded companies, reaching the 25,000 milestone holds more symbolic than practical value. It has risen steadily since 2009, but repeatedly marching through record levels last year. The Dow passed the 20,000 threshold days after Trump took office then kept climbing, posting 71 record highs in 2017. It passed 24,000 on Nov. 30, making the latest 1,000-point run the fastest in its 120-year history.
And stocks’ record-breaking rise is likely not over, market analysts say. “I do believe we’ll see 30,000 before the bull market ends,” said Chris Zaccarelli, chief investment officer of North Carolina-based Independent Advisor Alliance.
The broader Standard & Poor’s 500-stock index and the tech-heavy Nasdaq composite index are also trading in record territory. The S&P and Nasdaq rose less than 1 percent to 2,723 and 7,077 points respectively on Thursday. The Dow grew about 0.6 percent to close at 25,075.
“What it means is every time you see that number go up on Wall Street, it means jobs, it means success, it means 401(k)s that are flourishing,” Trump told lawmakers.
Technology and energy companies led the charge this week, bolstered by strong economic news around the globe.
But some market analysts cautioned that stock prices may be rising too fast.
“When markets move up this much and this fast, they often need time to take a break and let fundamentals catch up with the new valuations,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “So, enjoy the celebration and drink the champagne. But remember this: 25,000 is not necessarily a sign that everything is as good as the headlines suggest.”
Indeed, the S & P 500 hasn’t dipped 3 percent in more than a year for the first time in recent history. Some investors appear to be ignoring the normal warning signals for fear that they could miss out on more profits if they sell now, market analysts said.
Rising U.S. tensions with North Korea, an economic slowdown in China, the fallout from Britain’s decision to leave the European Union and even special counsel Robert S. Mueller III’s investigation into Russian meddling into the 2016 election have failed to shake investors. Stocks have continued to climb even as the Trump administration threatens to renegotiate trade deals that could spark retaliation by rivals such as China. Investors have, so far, also have ignored the potential market volatility that could coincide with Federal Reserve plans to raise interest rates.
When stock prices inevitably begin to fall, the decline could be more dramatic and quicker than it has in the past, market analysts caution. An eventual correction could “take some of the froth out of the market,” a good thing, said Mark Stoeckle, chief executive of Adams Funds.