The Dow punched through 20,000 but for serious traders, the achievement was largely irrelevant.
Goldman Sachs accounted for 21 percent of the rise, perhaps because their staff are so widely represented in Trump's cabinet and executive choices. Although the index is followed by the general public, it is not a particularly accurate index. Its importance is more psychological and this bullish enthusiasm feeds through to the more meaningful Nasdaq and S&P indexes.
The Dow and other major stock indexes such as the S&P 500 have two key features that ensure that they will continually rise and break new records: They are built on survivor bias and they ignore inflation.
Survivor bias means the index is made up only of winners. Losers are dropped from the index. There have been 133 different companies in the list of 30 stocks in the Dow. Only GE has been a consistent member over the 120 year history of the index, and even it was dropped from the index between 1901 and 1907.
The importance of the long-term inflation in driving stock market indexes higher is seen by understanding the "rule of 70." This rule shows how long it takes for the average price in the economy to double. For example, if something costs $10 today, the rule of 70 shows how many years it will take for the price to reach $20. To determine the number of years, divide 70 by the inflation rate .
Since the turn of the 21st century, US inflation has increased prices by roughly 2.2 percent per year. If prices continue to rise at this rate, then the typical price of most things in the US will double roughly every 32 years (70 divided by 2.2). So if inflation were to persist at this rate then the Dow will hit 40,000 in about 32 years from now, even if nothing changes in terms of economic production.