Dow Hit 50,000!

Dow Hit 50,000!

I still remember where I was when the Dow Jones hit 10,000 for the first time. I was still in high school at my best friend’s house (I’ll call him Ori since that’s his name), and his younger brother Jordan (again, his name) walked in saying, “Can you believe the Dow Jones hit 10,000!” I didn’t know I’d have a long career in financial services at the time, although my favorite class was finance, and apparently, the main childhood memory I have is when the Dow Jones hit 10,000 — so I guess I should have seen the warning signs.

That said, it took 76 years for the Dow Jones to hit 1,000 for the first time in November 1972. It took another 27 years to cross the 10,000 milestone in March 1999, so crossing 10,000 was no trivial achievement. What I remember more vividly is people saying that the number is bonkers and it will never hit 20,000, let alone 50,000.

Since this is a fun history lesson, let’s run through a few other key milestones for the record. The Dow took another 18 years to reach 20,000, eclipsing it on January 25th, 2017. Amazingly, the Dow only needed about 4 years to topple 30,000 (November 24th, 2020) and another 3.5 years to get to 40,000, first hitting that level in May 2024. Finally, just 21 months later, the Dow hit 50,000 for the first time this past February and reclaimed it again in May — its newest and fastest milestone!

I find all this quite interesting and eye-popping. Think about it — it took 76 years to grow the first 1,000 points and then just 21 months for the Dow to tack on the most recent 10,000. What gives?

A few key elements are driving this milestone, and more importantly, the pace of growth. By far the biggest contributing factor is simply mathematics. In simple terms, when the Dow went from 10,000 to 20,000, that represented a 100% increase (10,000 x 2 = 20,000). For the Dow to climb the most recent 10,000 points, it only had to appreciate 25% (40,000 x 1.25 = 50,000). So, there’s clearly some fun with numbers at play.

However, there are certainly other factors worth noting. We’ve had a significant amount of financial stimulus from the government over the past few years, coupled with elevated inflation. We’ve also seen a massive wave of investment tied to the AI boom, where investors are pricing in major growth assumptions. And the growing number of people contributing to 401(k)s and ETFs continues to fuel the engine as well. All of these are factors behind the most recent milestone and the pace we’re on.

The Story Within the Story

The story within the story is this: the markets didn’t care what you thought about wars, or inflation, or who was in the White House. The markets didn’t care that you were scared, worried, or excited. The markets simply do what they do, which is consistently and persistently appreciate over time.

Now, it was anything but a straight line, but that’s the fun of it all. Those who tried guessing or timing the market were generally left licking their wounds. I can’t tell you how many times over the years I’ve sat across from someone who was convinced that “this time” was different — that the headlines were too scary, the uncertainty too great, and the only rational move was to go to cash. And every single time, the people who stayed patient and stayed invested came out ahead.

Meanwhile, those of us who patiently and consistently stayed invested during the turbulence have been the beneficiaries of incredible growth. That, my friends, is the story within the story. Do you want to be the passenger who, when the plane hits turbulence, runs up and down the aisle? Or does it make more sense to stay in your seat, buckled and patient?

I have no clue when the Dow will hit 60,000, and I certainly look forward to the day it crosses the 100,000 milestone — although it will make me sound very old when I tell my kids, “I remember when the Dow hit 10,000. I was hanging out with my best friend (still calling him Ori) in his living room in high school.”

There’s your history lesson of the day. Hope you enjoyed it, and as always — stay wealthy, healthy, and happy!