April 9, 2010
That's Dow 11,000: the oh-so-closely watched barometer of the stock market. Lately Wall Street savants and their media pals have been nattering about whether and when the Dow Jones Industrial Average (DJIA) will reach 11,000. Yesterday (Thursday) the Dow closed at 10,927 and in recent weeks has been as high as 10,988. (When I started in the investment business it was at 1,000) But what does it mean? And why should we care?
Two short answers: 1. Nothing, and 2. We shouldn't.
Early last year the DJIA was hovering above 6,000 and financial panic was the order of the day. By the end of March it hit 7,000 and in late April 8,000. Remember when the Dow hit 9,000? July. And 10,000 came in October. So the latest number to fret about is 11,000. And it doesn't matter, not a bit. What matters is the health of our economy (getting better) and whether corporate earnings are rising (they will - and next week you'll hear about it) and if companies can increase their dividends to shareholders (they will do that too). Stock prices are not set by committee, they are set by the willingness of investors to invest. And investors are taking note of economic recovery.
So 11,000 will be reached and surpassed. So will 14,000 (we were there in 2007). Those numbers don't matter. The numbers on your monthly statement do.
GTC
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).