With the improving economic backdrop, equity markets have continued their strong rally. The Dow Jones Industrial Average, which bottomed intra-day at 6,440 on March 9, 2009 has risen above the mystical 10,000 level. The 57% advance in more than seven months is one of the largest on record. The improvement has been largely driven by the extraordinary stimulus efforts of global central banks, but more recently, is accelerating due to the return of economic expansion as consumers and businesses are increasing spending.
What is interesting about the Dow 10,000 level is that while celebrated by the media as a major threshold, the reality is it is just another number. In fact, the Dow has crossed 10,000 (and fallen below it) 28 times since 1999. While the Dow crossing 10,000 is impressive and newsworthy, it does not represent the finish line for this recovery, but rather just another mile marker on the market’s journey to recapture its value lost during the 2008-2009 recession. In fact, if we view the market’s recovery as a relay race, the Dow 10,000 level is closer to the mid-point of the journey as opposed to the finish line.
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