WELLINGTON: Wall Street’s venerable Dow Jones industrial average has broken through the 20,000-point barrier for the first time in its 120-year year history, taking some other markets with it. For the moment, the New Zealand sharemarket has been reduced to being a mere bystander. The Dow may well be one of the world’s best-known indices, but it has its limitations, being a solely price-weighted stock comprised of just 30 stocks. Fund managers tend to take notice of the more comprehensive S&P500 but even by that measure, the US market hit new highs on the back of Donald Trump’s success in the US Presidential election, and his promises to improve infrastructure, remove regulation, and to build a wall between the US and Mexico. According to the Financial Times, Trump’s November 8 victory ignited the steepest rally from election day to inauguration for a first-term president since John F. Kennedy won the White House in 1960.
Interestingly, investment bank and Dow constituent, Goldman Sachs, from which the Trump administration has drawn many of its key personnel, has seen its share price rally by US$56, or 30 per cent, to US$237 since the election. Goldman’s performance was cited as a key factor behind the index pushing through the 20,000 barrier first time. Post-election, the local market has had a firmish tone, but last night’s close of 7113.32 on the benchmark S&P/NZX 50 Index was well short of last September’s record high of 7571.1. “Rotation” is fast becoming a familiar term for local investors. Up until last year, the market enjoyed a strong run thanks to its role as a kind of surrogate bond market while yields sank to abnormally low levels the world over.
