This has been a great year for stocks, with major indexes marching ever upward. In fact, the Dow Jones (DJIA) Industrial Average broke another record on Tuesday morning, briefly cruising past the 23,000 mark.
The DJIA reached a previous milestone in August, when it surpassed 22,000. This is also the fourth 1,000-point climb for the DJIA in the past year, according to MarketWatch. The index is up 15% for the year.
What is the Dow Jones Industrial Average (DJIA)?
The DJIA is an index of 30 of the largest companies in the U.S., often referred to as blue chip stocks. The index includes familiar company names such as consumer products company Procter & Gamble, fast food chain McDonald’s, and footwear manufacturer Nike, among others.
Could it go higher?
Although there’s plenty of talk about about a bubble in stock market prices, the economy continues to be on sound footing, many financial experts say. The unemployment rate in the U.S. is 4.2%, its lowest level since 2001. Interest rates, which affect business borrowing and consumer spending, continue to be low. And for many, hiring remains strong.
* See footnote.
In addition, a slew of big company names from Netflix to Bank of America have reported stronger than expected earnings for the third quarter, which has helped to push indexes into historic territory.
The DJIA is an index of 30 of the largest companies in the U.S., often referred to as blue chip stocks.
“Corporate profits are strong,” David Wessel, director of the Hutchins Center at the Brookings Institution told National Public Radio on Tuesday. “Interest rates are low, which is good for stock prices because investors are looking for someplace to put their money [where] they get a better return than in bonds or bank accounts.”
Here are some other reasons why financial experts postulate the stock market indexes continue to climb:
- Congress is getting ready to debate tax reform, which could include major cuts to the corporate tax rate, a reduction in the number of tax brackets, and cutting the tax rate for the highest earners.
- President Trump has made deregulation one of his top priorities, which has a potential impact on businesses in just about every sector.
- The DJIA is made up of big companies, and many are releasing better than expected corporate earnings for the third quarter, which ended September 30. Investment banks Goldman Sachs and Morgan Stanley beat analyst expectations, according to reports.
- Healthcare stocks are also up, according to the Wall Street Journal, and are helping to drive gains in the DJIA.