The Dow hits 40,000. Here’s why that’s not a surprise.

The Dow Jones Industrial Average closed last week above 40,000 for the first time ever. That was fast. It was only 3.5 years ago that I was penning a Dow 30,000 commentary. (1) I’m happy to be writing this time from my New York City office rather than from my locked-down home.

Alas, there wasn’t much fanfare this time. At least, not like in 1999 when the Dow first pierced the psychologically important 10,000 mark. Back then, we gathered around the office televisions to watch the Big Board move into 5-digit territory. We erupted in cheers. Traders paid homage to the old ticker-tape days by throwing confetti into the air. Investors donned “Dow 10,000” hats.

I didn’t see many “Dow 40,000” hats last week. Maybe we’re just getting used to it. New market highs have historically happened very often. I haven’t run the numbers on the Dow Jones Industrial Average, but the S&P 500 Index has had almost 1,200 new highs since its inception in 1957, including 25 times this year alone. Historically, the S&P 500 Index has hit a new high the equivalent of roughly once every two weeks. (2)

You can revisit my thoughts about stock market highs in this commentary I wrote when the S&P 500 hit its first new high of 2024: Three things to know about the stock market’s new record high. The most important thing I want to reiterate is that this shouldn’t be a surprise. Stock market averages are reflective of the growing economy in the US and the world.? If we believe that the world will continue to get better, then we expect markets to trend upward over long periods and to hit many new highs.

We may not be partying like it’s 1999, but I’ll take that as a positive. As they say to football players who are too exuberant after scoring a touchdown, “act like you’ve been there before.” I’ll hand the ball back to the official and rest assured believing that in my lifetime the markets will continue to ascend new highs, even if the path isn’t always a straight one.

I’ll see you at 50,000. (3)

1. Source: Bloomberg, 5/16/24. The Dow Jones Industrial Average crossed 30,000 on Nov. 24, 2020.
2. Source: Bloomberg, 5/16/24. Based on the S&P 500 Index starting in 1957. Past performance does not guarantee future results.
3. There is no guarantee that the Dow Jones Industrial Average will reach 50,000. Market returns are highly variable from year to year.

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The Dow Jones Industrial Average is a price-weighted index of the 30 largest, most widely held stocks traded on the New York Stock Exchange.

The opinions referenced above are those of the author as of May 17, 2024. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.