The Dow closed above 20,000 for the first time today. Yawn.
Though pundits and politicians may trumpet today’s new high, we believe it’s an artificial, emotional barrier – nothing more. Sure, “Dow 20k” has symbolic value, but little substance.
Politicians can proclaim that today’s record proves that investors believe tax cuts, new trade policies and deregulation will spur domestic growth. But here’s the truth: the stock market behaves irrationally over the short term, and market sentiments can change on a dime.
Ferreting out the facts
Here’s another take. U.S. markets are getting frothy. Valuations are becoming expensive relative to historic norms. The bull market has raged on for nearly 8 years –- longer than most. And markets can and do revert to the mean. No one can say when that reversion will happen, but history provides the evidence that it will.
Thus, investors would do well to diversify beyond U.S. markets.
It’s not every day that the market hits a new milestone. But market drama will always be with us. Ignore short-term market noise, however celebratory, and sleep tight tonight.