Dow 20,000 and the History of the Dow’s Milestones

The Dow is within “striking distance” of reaching 20,000, a milestone that many investors may feel as though they have been waiting forever for (source). As we are potentially days away from the arrival of the Dow 20,000, and while this is merely just a number – a big, round number – we consider the history of the Dow Jones Industrial Average and the time it took to reach some of its past milestones.

Historically, the index has struggled reaching major milestones. The Dow first reached 100 in 1906, but after many fluctuations, it wasn’t until the mid-1920s before it convincingly traded higher than that level, and it permanently broke above it in 1942 (source).

This was the case for the Dow 1,000 as well. It initially hit the 1,000 mark intraday in 1966 but did not close above that mark until November 1972. It wasn’t until 1982, 16 years after initially reaching 1,000, that the Dow finally traded above that mark for good (source). It took roughly 15 years from first closing above 1,000 in 1972 for the Dow to progress another 1,000 points to the 2,000 milestone, yet only four years to go from 2,000 to 3,000 points.

The Dow first hit 10,000 in 1999, but the average fell below that level for 11 years, until 2010 when it took residence above that milestone. Now, seven short years later, the Dow is about to hit 20,000.

The chart below shows the important Dow milestones and additional key dates that defined what the Dow is today:

shj_sharkey_howes_javer_important_dow_milestones


As far as how long it takes for the Dow to double, there is also no specific trend with it taking 15 years to go from 1,000 to 2,000, four years to go from 5,000 to 10,000 and about 18 years to go from 10,000 to 20,000, assuming the Dow hits 20,000 this year (source).

You can see from the information presented that there is no clear historical pattern as far as the timing of these milestones are concerned, and the behavior of the Dow after passing such a milestone. Therefore, while the excitement surrounding the 20,000 milestone is mostly psychological, investors should not see this as an excuse to alter their long-term plan. According to The Wall Street Journal, “That is the best advice for anyone, no matter what the Dow has done, is doing or will do. Timing the market based on anything is a fool’s strategy. It fails at least as often as it works” (source). Keep in mind that this is only one index, and while the Dow could be part of a diversified strategy, it does not represent a diversified portfolio.

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