High hopes for a business-friendly Donald Trump White House helped the Dow crack the 20K milestone, and market watchers think the president's policy can keep stocks humming even as concerns about prices rise.
The industrial average has now topped 20,000, rising 9 percent since its close on Election Day. Stronger U.S. economic data and optimism about Trump's business policy, among other factors, have pushed not only the Dow, but also the other major averages and small-cap stocks, higher in that time.
Risk factors like rising valuations, a potentially strengthening dollar and climbing interest rates could knock markets back down in the short term, experts said. Stocks have endured a sluggish period since mid-December after the initial post-election rally wore off.
Still, experts said Trump's proposals, including corporate tax cuts, repatriation of cash overseas, deregulation and infrastructure spending, give investors enough hope for rising corporate earnings that the Trump enthusiasm may continue well into his administration.
"The market is perceiving this as a business-friendly administration that is coming into office for the next four years. ... It wouldn't take much to give earnings a real boost. I think that's where the market is coming from and I think it will continue," said Bruce Bittles, chief investment strategist at Baird.
While the Dow components are considerably less industrial than they used to be, most of the companies have a lot to gain from Trump's plans. He wants to cut the corporate tax rate from 35 percent to 15 percent and touted that plan in meetings with business executives since he took office.
Trump will try to give companies incentives to bring cash back to the United States. Apple, for example, has $216 billion parked abroad. Goldman Sachs and JPMorgan Chase would benefit from looser financial regulations, while Exxon Mobil and Chevron could get boosts from easier energy production rules.
Trump has already signaled he will be friendly to the oil and gas industry, as on Tuesday he signed executive orders to advance the controversial Keystone XL and Dakota Access pipelines.
Those are just some examples of how Trump's proposals could help Dow component companies at a time when U.S. economic data has shown improvement.
"I think that all of this together has encouraged investors, given them some semblance of hope," said Robert Pavlik, chief investment strategist at Boston Private Wealth.
Still, market watchers said Trump administration policies could get derailed in ways that may quash market optimism. Some plans may not get "enacted with the same order of magnitude as expected" or not get passed "soon enough" to sustain the excitement, said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
For instance, some congressional conservatives have expressed misgivings about the spending binge that Trump has proposed. He has also brought infrastructure up only sparingly since he took office.
While key Republicans in Congress have supported Trump's corporate and personal tax cuts, it remains to be seen if they can pass his desired 15 percent business rate.
Even if Trump achieves all of his desired policies, the market could see a pullback before it starts climbing again, strategists added. Major averages fell last month after the Federal Reserve hiked the federal funds rate by a quarter point. The Dow also retreated more than once recently after approaching the 20K mark.
Still, strategists said that if the expectations for Trump's pro-business White House become reality, earnings could get enough of a boost to keep pushing stocks higher.