Whilst many stipulated back in November that the dizzying post Trump rally could not reach much further than the 19,000 point barrier (in itself an achievement), few would have thought that 20,000 was a possible target.

Yet here we are. And have been for some time now.

19,000 was broken within two weeks of Trump’s election, albeit in what was only a circa 600 point move. It took a further six weeks for the index to come within 100 points of 20k and looked set to push through it as a matter of imminence. But then something strange happened. The Dow stalled.

Fast forward another month and here we are, still within touching distance of the hallowed mark but still unable to break through. Why has this been?

Aside from anything else, the Christmas and New Year break put a spanner in the works as lower trading volumes saw bears beat the bulls during the shortened trading weeks. A sell-off back to the 19700s left many questioning whether 20,000 was an unobtainable feat. Meanwhile, across the Atlantic, the UK 100 rocketed to an unexpected fresh all-time high before the Dow.

The reason behind this was a factor that had previously led the Dow higher.

US Dollar strength was shooting through the roof, with records tumbling. Only the second Fed rate rise since the financial crisis saw 14-year highs against the Euro shortly followed by a 13-year high for the currency’s basket index. This contributed to the UK Index ‘s quiet ascent to finish 2016 as the sole major index record breaker. At the turn of 2017, however, the dollar has slipped from its highs.

So how long might Dow bulls be waiting until they can don their 20k caps?

Much depends on the performance of commodities in the wake of the cooling dollar. The falling value of the greenback normally sees a surge in crude oil prices, helping many of the industrial names that give the index its name to outperform. However in recent years the emergence of multi-billion dollar tech firms to the index’s books has meant this provides less of a boon than it may have in the past.

January 1 marked the start date for the production cut quotas of OPEC and non-OPEC oil producers after November’s successful meeting in Vienna. The boost that the surprise agreement gave the the index at the start of the Santa Rally cannot be understated. However, the world’s most famous cartel has a notorious compliance record, with recent analysis from Goldman Sachs showing that historically, the group only complies to within 60% of targets.

Finally, the inauguration of Donald Trump, whose election was the primary catalyst for the Dow’s impressive run, will take place on January 20. With promises of deregulation across many sectors crucial to the post-election rally (most notably in the financial sector, where stalwart Goldman Sachs contributed a third of all gains in the run up to Christmas), a swift move alongside his advisers and congress could provide immediate impetus for the index to finally break 20k.

Whilst many of the factors that could see the Dow break through 20,000 look to be falling into place, it remains uncertain as to when (or even if) the blue chip index can indeed take the plunge.

Henry Croft, Research Analyst, 5 January