The US Dow Jones Industrial Average reached the 40,000 milestone on May 16, 2024, nearly 3.5 years after hitting 30,000. This ascent was driven by investor sentiment recovering from the pandemic, rising corporate profits, cooling inflation, and increased speculation about interest rate cuts.
Data indicates that the time it takes for the Dow to gain every 10,000 points is decreasing. The rise from 1,000 to 10,000 took almost 18 years, while the climb from 10,000 to 20,000 was completed in just 13 years. The move from 20,000 to 30,000 took about four years, and the subsequent jump to 40,000 took only 3.5 years.
Dow Jones claim to the 40,000-mark was supported by resilience seen in the US economy, positive macro indicators, and rate cut speculation. For instance, consumer prices eased to 3.4 percent in April, marking the first decline in 2024 and prompting traders to bet on a 70 percent chance of a rate cut in September, according to the CME FedWatch tool.
Additionally, initial jobless claims dropped by 10,000 to a seasonally adjusted 2,22,000 for the week ending May 11, further boosting market sentiment.
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Dow Jones' journey to 40,000 from 10,000 - a brief timeline
Looking back, Dow Jones had hit the 10,000 mark on March 29, 1999 amid 'irrational exuberance' of the tech bubble, but a year later when the dot-com bubble busted, it sent the Dow nearly 30 percent down by September 2001.
To add to this crisis, the meltdown of 2008-2009 financial crisis also weighed on the index, sending it below the 10,000 levels. However, the index recovered to 15,000 on May 7, 2013 as the economy recovered from the Great Recession.
On January 25, 2017, the Dow Jones climbed to the 20,000-mark as investors eyed lower taxes and less regulation under the Donald Trump administration. Later, the index climbed to the 25,000-mark on January 4, 2018 helped by the passage of Trump tax cuts, particularly lowering of corporate tax rate in December 2017.
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However, the index tumbled to the 18,000-mark in March 2020 once the Covid-19 pandemic struck.
Over the following months, the index progressed as the Covid vaccine development ramped up and the Federal Reserve and its officials took dovish steps to support liquidity in the economy. By November 24, 2020, the Dow Jones managed to close 30,000 for the first time, keeping the stock market sizzling once again.
It has been a long and winding road for Dow Jones to reach these levels. And it's journey to 50,000 is yet to be seen as market participants await interest rate cuts, elections, and improving market dynamics.
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