The Dow Jones today reached an all-time high, closing at 35,743.06 points. This is the first time the Dow Jones has had a record close since January 28 this year. Stocks are soaring on hopes that Congress will pass their tax plan before Christmas. It’s also worth noting that the past few days have seen a dramatic drop in volatility, with some analysts thinking this is due to today’s surge in stocks. If you’re looking at your portfolio and wondering how it stacks up, here are some helpful hints about stocks today.
What is the Dow Jones?
The Dow Jones is a stock market index that tracks the performance of 30 major U.S. companies. The index has been in existence since 1896, although it has not been continuously compiled. There are various indices that track the Dow Jones. The S&P 500 is a broader index that tracks 500 of the largest U.S. companies, and the NASDAQ Composite Index tracks about 3,000 of the largest tech companies. What is a Dow Jones record? Today is the first time the Dow Jones has had a record closing. The Dow Jones hit its previous record high on January 25, which came a month after the index hit its previous high of 26,616.71 on January 6. What about earlier records? The Dow Jones first hit a record high on October 14, 1999, with a reading of 14,164.53.
How do stocks work?
Sophie Cugielet is a senior investment specialist at UBS Wealth Management Americas. She explains: “While it’s possible to make an analogy to investing in a stock, bonds, or cash equivalents, the reality is much more complex, because bonds and cash are easy to buy and sell, whereas stocks have long-term potential. Because stocks have the potential to grow for decades, they are a great way to diversify a portfolio and get a bigger bang for your buck.” Any good time to invest? “The biggest risk is timing,” Cugielet says. “The longer you wait, the more likely it is that the market gets ahead of itself. The easiest way to play the equity market today is through an ETF.” These options can give you broad exposure to the stock market.
The tax plan and the Dow
On Tuesday, the Senate released its version of the tax bill, and by afternoon, the Dow Jones had hit a new record high of 26,801.11. The Senate will release its tax bill later today, but based on what’s out there, it’s safe to say that the Dow Jones will go higher. As the tax bill heads toward a vote, it’s increasingly likely that this is going to pass. Advertisement Here’s what’s in the Senate’s tax plan The Senate tax bill, at this point, looks quite similar to the one that the House of Representatives passed last week. Here’s the basics: $1.
Volatility and why it’s important
During the day, stocks can easily move up and down. But often the action becomes really extreme in the final hours. Since stock indexes are based on share prices, if one stock goes down, it means that its share price has fallen. The S&P 500 index, which is the benchmark for the overall stock market, has a wide range of stocks that make up its index. There are so many different stocks in the index, that its price movement is partly determined by how each one did in the last trading session. Chart from CBOE shows three-month S&P 500 futures. So how can you gauge how your portfolio is doing? You can gauge its volatility by calculating the difference between the average number of points a stock moves up and down compared to the previous trading session.
Stocks are continuing to rise on speculation of a tax bill being passed, with some analysts saying that they’ve seen a spike in volatility on their way up as well as in the past few days as uncertainty around the bill is disappearing. However, this is a common trend for stocks as optimism grows, so it’s expected to fade. Keep an eye out for the news in the coming days, as that could change the current story. If you’re interested in a top-notch research report on the stock market and want to learn how to diversify your portfolio securely, consider joining our service for just $1/month.