The milestone-busting Dow has done it again.
The Dow Jones industrial average topped 25,000 for the first time Thursday, kicking off 2018 where it left off last year with sizable stock market gains powered by a global economic recovery and optimism that the Republican tax-cut bill will provide a fresh boost for U.S. growth and help American companies make more money.
The 30-stock index, which includes leading U.S. companies like Apple, McDonald's and Wal-Mart, jumped nearly 119 points in early trading to eclipse Dow 25K for the first time in its 121-year history.
At its high point today the Dow as at 25,041.29.
The continued rise in stock prices in 2018 after a 25% gain last year extends a bull market that began in March 2009 and is now the second-longest in Wall Street history, trailing only the nearly 10-year rally in the 1990s.
"Welcome to the bull market," says Brian Belski, the chief investment strategist at BMO Capital Markets who predicted at the start of the bull that it could last 15 to 20 years and now says the market is being driven higher by improving business conditions.
"Dow 25K is just another milestone, not the top," Belski adds, noting that too many investors are skeptical of the rally, keeping euphoria at bay. "Market tops are not made just because a certain number is hit."
Many Americans, however, have not benefited from the stock market's multi-year rise, as only 54% have investments in stocks, down from 62% before the 2008 financial crisis, according to Gallup. Many Main Street investors got out of the market after it lost more than half its value in the 2007-09 bear market and never got back in.
The Dow is on track for its third straight day of gains to start the year. It is coming off its best year since 2013.
"The most doubted bull market of all-time continues to lay waste to the skeptics," says Alan Skrainka, chief investment officer at Cornerstone Wealth Management in Des Peres, MO.
The stock market is forward-looking, he adds, and clearly believes good economic news is around the next corner.
Investors' latest stock-buying binge comes amid Wall Street's positive reaction to the Republicans' major reform of the U.S. tax code, which was signed into law before Christmas by President Trump. The centerpiece of the bill is a steep cut in the corporate tax rate to 21% from 35%.
That change, which the Trump administration says will make U.S. companies more competitive globally, has boosted investors' so-called “animal spirits,” or willingness to take risk. Wall Street analysts say the tax savings will boost earnings for companies in the S&P 500 stock index by as much as 10%.
The Dow's ongoing rally, which has come without a drop of 5% in the past 18 months, has also been fueled by an economic recovery worldwide. That has boosted the profitability of American companies, reduced the U.S. unemployment rate to 4.1% and lifted the confidence of consumers to a 17-year high.
Wall Street hopes 2018 will be a repeat of last year.
2017 was a year of milestones for the Dow. It posted 71 record closes, the most ever. It also barreled through six 1,000-point milestones, starting with Dow 20,000 five days after Trump took office in January 2017.
Nick Sargen, chief economist and senior investment advisor at Fort Washington Investment Advisors in Cincinnati, says it's getting hard to come up with adjectives to describe the Dow's record-setting run.
"Dow 25,000 is a milestone, but we've been through so many since the market began the surge from the financial crisis in March 2009 that it doesn't lead to a superlative," Sargen told USA TODAY. "The catalyst for the latest surge is passage of the tax bill, but the bigger picture is a synchronized global expansion that has caused global markets to surge together."
The market's next moves, he adds, will depend on whether companies get the earnings boost most analysts expect. Stocks, of course, are overvalued by many measures and will confront higher interest rates, another potential headwind, in the new year.
Sargen, however, doesn't view Dow 25,000 as a sign it is nearing a peak.
"Where do we go from here? Now that the tax bill is priced in, the market will key off earnings," says Sargen. "The environment in 2018 appears quite favorable here and abroad, so it's too early to call a top. That said, returns in 2018 won't come close to matching this year's outsized returns."