Personal Finance

Why the Dow Closing Below 20,000 Does Not Matter

The ups and downs of the stock market make celebrating any milestone a bit foolish.

People cheered on Jan. 25 when the Dow Jones Industrial Average closed over 20,000 for the first time. Now, just a few days later, the Dow has closed below that number and it feels a bit like we all went to a 100th birthday party only to realize that the person celebrated was now only 97 again.

It's a pattern that tends to repeat itself. The media, people who follow the market, and even those just roped in by the news cycle get caught up in what's actually an arbitrary round number. In general, the stocks you believed were worth buying and holding for the long term did not change just because the market moved above or below some milestone.

In this case, with a new administration bringing added uncertainty, it's going to be a bumpy ride. That does not mean you should (for the most part) change your personal investing strategy.

President Donald Trump's actions have sent the market down and his next move could send it back up. Image source: ABC/Ida Mae Astute .

What is happening now?

The Dow went on a run once Donald Trump became the president-elect. That happened because the former businessman was viewed as being more pro-business and against regulation than his one-time opponent Hillary Clinton.

That wave, which continued post-inauguration, eventually sent the Dow over 20,000 where it stayed for two full market days. The market doesn't like uncertainty, and now, with some global concerns over Trump's efforts to ban travelers -- including refugees -- from seven countries from entering the United States, the market has slipped below the 20,000 threshold.

Starbucks is still Starbucks

Short-term political storms can be a drag (or a boon) not just on the market overall, but on individual stocks. As just one example, Starbucks (NASDAQ: SBUX) CEO Howard Schultz wrote a letter to his employees openly opposing Trump's actions and pledging to hire 10,000 refugees by 2018.

That's a move likely to increase the company's support among those opposing the president while it has led to calls to boycott the chain from those who support him. No matter your opinion on the issue, it's important to remember that the administration's actions have not done anything to change Starbuck's long-term fundamentals. If you believed in the company's commitment to technology, its expansion plans, and its efforts to grow its premium Reserve/Roastery brand, then in the long term all of those elements are still in place.

Unless you believe that a company has angered a meaningful percentage of its audience in a way that won't fade over time, even high-profile, short-term controversies don't change the business. In fact, if you believe in a company, short-term market woes create buying opportunities to pick up additional shares on a pricing dip.

20,000 does not change the market

It's important to remember that Dow 19,000 versus Dow 20,000 or even Dow 21,000 does not change the fundamentals behind any one company. Same goes for a flashy news item, or even an election surprise .

A well-run brand that you believe in, as long as you're confident it can survive any short-term instability, remains a good buy no matter where the market sits.

It's fun to celebrate new highs (less so with milestone lows), but it's important to not let these numbers, or any short-term news, impact your long-term investment plans. After all, Dow 20,000 was only a milestone because we like round numbers.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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