Wednesday, March 17, 1999
Making 200 - now that was a leap
BY URSULA MILLER
The Cincinnati Enquirer
It's not your imagination. It's definitely getting easier for the Dow Jones Industrial Average to make new 1000-point leaps. The credit goes to investors, of course, but also to mathematics.
“The percentage gains are decreasing,” said Steve Folker, chief equity strategist for Fifth Third Bank.
EACH HURDLE EASIER
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The 1,000-point milestones on the Dow Jones Industrial Average have diminished in percentage terms as the blue-chip index has grown larger. Here are the dates the Dow passed each 1,000-point milestone and the percentage change from the previous 1,000-point increment.
Nov. 14, 1972 — Closes above 1000 for first time at 1003.16
Jan. 8, 1987 — Closes above 2000 for first time at 2002.25 (100 percent increase from 1000)
April 17, 1991 — Closes above 3000 for first time at 3004.46 (50 percent increase from 2000)
Feb. 23, 1995 — Closes above 4000 for first time at 4003.33 (33.3 percent increase from 3000)
Nov. 21, 1995 — Closes above 5000 for first time at 5023.55 (25 percent increase from 4000)
Oct. 14, 1996 — Closes above 6000 for first time at 6010.00 (20 percent increase from 5000)
Feb. 13, 1997 — Closes above 7000 for first time at 7022.44 (16.7 percent increase from 6000)
July 16, 1997 — Closes above 8000 for first time at 8038.88. (14.3 percent increase from 7000)
April 6, 1998 — Closes above 9000 for the first time at 9033.23. (12.5 percent increase from 8000)
March 16, 1999 — Crosses 10,000 for the first time. Closes at 9930.47. (11.1 percent increase from 9000)
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That's because the base is getting bigger, so it takes less momentum to reach the 1,000-point next milestone.
Consider the Dow's jump between 1000 and 2000. That 1,000-point move constituted a 100 percent increase. But the next 1000-point jump to 3000 amounted to a 50 percent increase.
And so it has gone.
The jump from 8000 to 9000 constituted a 121/2 percent increase and the latest move to 10,000 amounted to a 11.1 percent increase.
So why all the hoopla?
Psychology.
“In the scale of numbers, 10,000 is pretty high. We're also getting close to the millennium. It's a psychic coincidence,” said Declan O'Sullivan, a partner at money manager O'Sullivan & Sims downtown.
Such a major milestone also underscores the longevity of the greatest bull run this century.
“I really don't think it's that big of an event, other than to show that the long-term bull market lives on,” Mr. Folker added.
Perhaps most important, milestones put history into context.
Consider the political and economic events that have either helped or hindered the Dow's ability to notch previous records.
“Getting to a thousand was a miracle,” Suanne Luhn, a portfolio manager at Bahl & Gaynor, said.
The Dow flirted with 1000 several times over six years, getting as close as 995 in February 1966 and up to 985 in December 1968. It didn't actually hit 1000 until Nov. 14, 1972 and that was at the peak of a bull market. The Dow soon skidded, losing nearly half its value by December 1974. It didn't close above 1000 again until 1980. It didn't consistently stay above 1000 until 1982.
Recession smothered the country in the mid-1970s into the early 1980s in the wake of the oil crisis, Nixon resignation, Vietnam war and skyrocketing inflation. The stock market didn't stand a chance.
Looking even farther back in time, other significant historical events have punctuated the market.
“I remember when the Dow went through 200,” said John “Skip” Tobias, a broker since the mid-1950s now at Gradison-McDonald downtown. “I think it was in the late '40s or early '50s. It was a big day. Can you imagine that, 200 being a big day?”
The Dow had hit 200 way back in the late 1920s but the Great Depression decimated the market and it wasn't until after World War II that the Dow regained solid footing in the 200 range. The Dow fell to a low of 41.22 in 1932.
But with each major downturn — whether it was precipitated or exacerbated by war, depression or recession — the seeds were planted for the next upturn.
Mr. Tobias, 75, said it's much more fun being a broker today because the market has been so strong for so long.
“It's much more fun because the market goes up all the time. It's no fun when the market doesn't go up. Back in the early '70s, it was awful. It (Dow) fell in half from 1000 to 500. It was a terrible couple years, like torture.”
As for Dow 10,000, Mr. Tobias said he never thought he would see the market rally this far.
“This (bull market) has been almost hard to believe,” he said. “I can't say I looked to the future that way as to guess where the Dow was going. Stocks were not nearly as widely held as they are today. I wouldn't have had the foresight to even guess this would ever happen.”
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