Dow 16,000: Big Deal or Overhyped Milestone?

Dow 16,000: Big Deal or Overhyped Milestone?

The Dow Jones Industrials hit 16,000 for the first time ever earlier this week, and many people pointed to it as a possible sign of a further rise for the broader stock market. Yet in the grand scheme of things, is the Dow's hitting 16,000 really all that big a deal, or is it just a way to get average investors excited about the market again?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the question of whether Dow 16,000 is worth paying attention to or just a passing fad. Dan notes that as the Dow has climbed, 1,000-point milestones aren't nearly as far apart in percentage terms as they used to be, making them easier to reach. Dan also points out that the concentration of high-priced stocks in the Dow makes passing milestones that much easier, as Visa , IBM , and Goldman Sachs make up almost a quarter of the average from a price-weighting standpoint, even though they only represent a tenth of the 30 stocks in the average.

Dan concludes that as interesting as Dow milestone can be, the bigger question for the bull market is whether broader measures like the S&P 500 and the Russell 2000 also keep going up. As long as they do, bulls can expect further gains from the market.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Visa and owns shares of IBM and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published