Dow flirts with 14,000
(MoneyWatch) The first time the Dow Jones Industrial Average closed above 14,000 was in July 2007. As the Grateful Dead would say, "what a long strange trip it's been." The Dow went from 14,000 down to 6,547 in March 2009 and today breached the 14,000 level for the first time since 2007, before pulling back. Presuming the index closes above 14,000 today or in the next couple of days, the next milestone will be to take out the previous all-time nominal high close of 14,164, reached Oct. 9, 2007.
You can excuse investors for not celebrating these levels with the same amount of zeal as the first time around. Let's face it: A bruising bear market lingers in everyone's memory, which may be a good thing. In fact, the most worrisome aspect to the recent rally is the advent of headlines like "As Worries Ebb, Small Investors Propel Markets." Analysts warn that market tops often occur soon after retail investors buy back into the market.
Sure, there are good reasons that the market is moving higher. As noted earlier this week, these are a number of bullish factors that are creating a tailwind for stocks and helped the Dow log its best January since 1994:
-- Europe is no longer on the precipice of disaster
-- The much-feared hard landing in China never came to fruition
-- Japanese officials have started to address the country's multi-decade economic stagnation
-- The Fed is maintaining its low interest-rate policies (including the monthly purchase of $85 billion worth of bonds) until employment improves substantially
-- The debt ceiling debate has been delayed until May
-- U.S. housing is finally contributing to economic growth
-- Manufacturing has firmed
With all of those good reasons in place, you may be tempted to jump back into the market fray. You wouldn't be alone: TrimTabs reported that investors dumped a record-setting $55 billion into equity-related mutual and exchange-traded funds in 2013 as of January 23. But before pushing that buy button, be clear about where you are in your life and what amount of risk really makes sense for you. Dow 14,000 may be a great number, but it does not guarantee that we won't see Dow 13,000 again.