How Donald Trump Pushed the Dow Jones Index (DJIA) Over 20,000

dow jones indexDow Jones Crosses the Critical Psychological Barrier

The Dow Jones Industrial Average (DJIA) finally crossed the 20,000 mark on January 25, 2017, sending investors into a frenzy and giving further wings to the Trump rally. The DJIA closed at 20,068.51 on Wednesday after hovering around the 19,000 level since November.  

The current stock market rally began with the surprise election win of Donald Trump in November last year. Soon after the win, Trump made certain announcements that fueled investor and business optimism.

He vowed to increase government spending and build infrastructure for economic growth. Trump added that a number of regulations were stifling American businesses, so he would be easing them substantially. Most importantly, he said that he planned to cut taxes across the board. Such promises helped the Dow Jones Index breach the 20,000 barrier.

Donald Trump’s Impact on Sectors

Almost all the sectors were impacted by Trump’s announcements as he kept on emphasizing his pro-business policies.

Despite the open criticism of certain technology companies in his election campaign, Donald Trump promised that he will provide incentives to companies if they move manufacturing to the United States. He further added that he would provide tax incentives to bring back overseas cash held by technology companies and also lower corporate taxes. Such promises brought some cheer back to the technology sector, which missed out on the Trump rally early on.

Apple Inc. (NASDAQ:AAPL) stock made a good comeback since last year, when Trump had warned the company not to outsource “iPhone” production to China.

Trump promised to not only lower corporate taxes, but also reduce taxes across the board, especially for working and middle-income Americans. This would mean putting more money in the hands of consumers to spend.

Higher economic growth, combined with more disposable income, boosted the prospects of stocks like Walt Disney Co (NYSE:DIS), which has been one of the top gainers in the Dow Jones since Donald Trump won the election.

Trump promised to invest heavily in infrastructure, which meant more investments, more jobs, and higher economic growth. This boosted construction equipment stocks like Caterpillar Inc. (NYSE:CAT).

Trump did not stop here; he also made promises to ease regulations and make the country a very business-friendly place. The pharmaceutical sector, which had been in the spotlight over high drug prices, turned upbeat, thereby buoying stocks like E I Du Pont De Nemours And Co (NYSE:DD) and Pfizer Inc. (NYSE:PFE).

The prospects of higher economic growth implying higher interest rates, coupled with loosened regulations, made the financial sector very attractive for investors. Goldman Sachs Group Inc (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and American Express Company (NYSE:AXP) turned out to be some of the top gainers of this Trump rally.

Thus, industrial and financials stocks played a large role in the Dow Jones Index crossing the 20,000 barrier.

The table below shows the movement of Dow components since the election day, showing the top gainers.

Symbol Name Nov. 7 (CP in $) Jan. 25 (CP in $) % change
DJI Dow Jones Industrial Average 18259.6 20068.51 9.91%
GS Goldman Sachs Group Inc 181.48 237.25 30.73%
JPM JPMorgan Chase & Co. 69.88 86.03 23.11%
CAT Caterpillar Inc. 83.75 98.15 17.19%
BA Boeing Co 143.03 167.36 17.01%
AXP American Express Company 67 76.89 14.76%
IBM International Business Machines Corp. 155.72 178.29 14.49%
DIS Walt Disney Co 94.43 108.04 14.41%
UNH UnitedHealth Group Inc 141.93 161.24 13.61%
TRV Travelers Companies Inc 105.36 117.67 11.68%
HD Home Depot Inc 123.75 137.48 11.09%
AAPL Apple Inc. 110.41 121.88 10.39%
DD E I Du Pont De Nemours And Co 69.51 76.67 10.30%
CVX Chevron Corporation 106.85 117.24 9.72%
INTC Intel Corporation 34.69 37.8 8.97%
MCD McDonald’s Corporation 112.82 121.79 7.95%
UTX United Technologies Corporation 103.05 110.96 7.68%
NKE Nike Inc 50.91 53.86 5.79%
MSFT Microsoft Corporation 60.42 63.68 5.40%
VZ Verizon Communications Inc. 47.46 49.77 4.87%
MMM 3M Co 169.74 176.73 4.12%
GE General Electric Company 29.31 30.37 3.62%
PFE Pfizer Inc. 30.38 31.29 3.00%
MRK Merck & Co., Inc. 60.05 61.08 1.72%
V Visa Inc 82.51 83.9 1.68%
PG Procter & Gamble Co 86.56 87.16 0.69%
XOM Exxon Mobil Corporation 85.45 85.34 -0.13%
CSCO Cisco Systems, Inc. 30.94 30.7 -0.78%
KO The Coca-Cola Co 42.46 42.12 -0.80%
JNJ Johnson & Johnson 116.66 112.8 -3.31%
WMT Wal-Mart Stores Inc 69.78 66.89 -4.14%

*CP=Closing Price

Dow Jones Industrial Average: What’s After 20,000?

Going forward, most investors are cautiously optimistic and looking at more clarity on Donald Trump’s trade policies, which are being considered as protectionist and not positive for the economy in the long term. So it is wait-and-watch time for the stocks and the Dow Jones Industrial Average.