Dow Jones breaches historic 20,000 mark for the first time

The benchmark US stock index, the Dow Jones Industrial Average, hit the psychological 20,000 mark for the first time in its history on Wednesday, as the "Trump Rally" rolled on.

Several major US stocks have been boosted by expectations that the policies of new President Donald Trump will be beneficial for economic growth in the country.

In the aftermath of Trump's victory over Hillary Clinton in November, Wall Street´s most emblematic index shot up towards the barrier, but had cooled off in recent weeks. Yet undaunted by the Republican's inauguration on Friday and subsequent executive orders to withdraw and negotiate on the TPP and NAFTA, respectively, served to send the index through the magic number.

The full Trump Jump has so far seen the Dow Jones - on which of America's largest exporters are listed - vault more than 10% since 8 November, the day of Trump's unexpected win.

"Some doubts about the president have subsided and we are clearly seeing a pro-business administration that is minded to action," said Neil Wilson, senior market analyst at ETX Capital. "That pro-growth message is being rammed home and the markets have responded."

The index breached the 10,000 mark in the final push of the "dotcom bubble" of the 1990s, which saw the birth of some of the biggest internet companies of today, such as Amazon, Google and eBay.

As the Dow has spurted higher, so has the Shiller CAPE ratio, one of the most widely-used measures of valuation for the US stock market. It currently stands at 28.46, its highest level for 15 years.

The US dollar has stumbled in the aftermath of Trump's victory and some analysts suggest that it may drift, at least until the President's policies show more substance.

"Investors now need to see the detail as to how these policies will be drafted, the impact on the budget deficit and the extent to which Congress is on board," said senior FX strategist at Rabobank, Jane Foley. "Without this detail USD bulls are unlikely to regain the upper hand."

Meanwhile bonds yields have been on the rise as investors dig in for an expected acceleration in US interest rate hikes, which the Fed is mooting as Trump's vaunted fiscal stimulus and increasing trade tariffs both would fuel inflation.

The US 10 year Treasury is now yielding 2.5%, compared to 1.6% six months ago. The UK 10 year gilt has gone from yielding 0.8% six months ago to 1.5% on Wednesday.

Analyst Laith Khalaf at Hargreaves Lansdown noted that there have been many "false dusks" for the bond market, which has defied expectations since ultra-loose monetary policy was initiated many moons ago in response to the financial crisis.

"Central banks in the UK, Europe and Japan are still engaged in stimulative activity, and while the US Fed is starting to push in the opposite direction, it’s likely to err on the side of caution lest by raising rates too soon it damages the USeconomy, and propels an already strong dollar even further upwards.

"While the best days for the bond market may be behind us, there‘s no sign that interest rates are going to return to pre-crisis levels any time soon, which acts as an anchor on rising yields."

On stocks, Khalaf said that while indices in the US and UK are at or near record highs, when the corporate earnings are factored in, stock valuations show neither the extreme pessimism of 2008, nor the irrational exuberance of 1999.

"This means they are trading somewhere in the middle of their range, so are neither exceptionally cheap or hideously expensive. In the short term the stock market could move in either direction, but for long term investors it still makes sense to keep a healthy slug of their portfolio in equities."