In the next few days, either just before Christmas or just prior to the New Year, the DOW Jones Industrial Average is set to reach the record high milestone of 20,000 points, something never before seen in American History, and is debated across the economic spectrum as to how it will impact the economy. Following the election of Donald Trump at the beginning of November of this year, the economy, especially the Industrial Averages, rebounded from major losses the night of the election from losing nearly 800 points in Futures upon anticipation of the election to Hillary Clinton to losing only 200 points on the 9th on the election of Donald Trump, a positive sign for his administration moving forward. That was not everything that has occurred over the last month signifying what he brings to the economy in both the way of emotional influence and physical influence. Donald Trump has been continually negotiating with companies, such as Carrier Air Conditioning and Boeing, the main air craft manufacturer globally, in order to bring jobs back to the economy as well as to keep money going back to the people. More recently, President-elect Trump met with Boeing CEO, Dennis Muilenburg, in order to decrease the price for two new aircraft for the executive branch of the federal government, including two new aircraft associated to Air Force One, from $4 Billion down to some unannounced, but lesser, sum. Carrier Air Conditioning management, headquartered in Indiana, was met with harsh criticism and boycotts following their announcement laying off nearly 1100 individuals from their manufacturing in Indiana, and outsourcing those jobs to a plant in Mexico. That criticism of the now President-elect Trump, who sat down with management of Carrier in November, negotiating to keep employees in America in exchange for a substantial tax cut and deduction. This has set the potential for a significant precedent set by the incoming President Donald Trump, and could be cause for major concern or praise in the future. The projections for the economy following the massive point gains in both the DOW and NASDAQ, which can be directly attributed to the election of Donald Trump, have been the exact same way: both negative and positive.
Let’s get the bad news out of the way first. There is a possibility of the economy tanking as a result of the DOW Jones attaining 20,000 points. That is not as a result of the expansion, although it has been rather rapid and could be considered unsustainable. This expansion has benefitted the vast majority of Americans, developed by increased investment as well as increased consumer spending due to the Christmas season. The bearish market could come as a result of the milestone being reached and the desire of both small and large investors using that as a cue to sell their stocks. While this may seem irrational and not make much sense, it actually makes perfect sense. The selloff would not be a result of a fear of collapse or other influences, but rather would be due to the perception of no necessity to maintain stocks and just a desire to collect on surely increased stock prices.
The potential good news could be rapid expansion, but not too rapid so as to cause a bubble followed by a collapse (similar to the Housing Crisis of 2008), which would increase salaries and the value of small investments, promoting even more consumer spending and investment, leading to continued, gradual, and sustainable expansion. Fortunately, this seems more likely than the doomsday scenario that I described above. The expansion recently witnessed in December was just a taste of what is to come under a President Trump. The decreased taxes as well as a de-regulation spree will encourage the majority of Americans to both invest as well as encourage those with innovative ideas and with business aspirations to start investing in the economy as well as contributing to its expansion.