"Dow Jones Closes Above 20,000 Points For First Time Ever"

ROBERT SIEGEL, HOST:

Today - a first for the Dow Jones Industrial Average. It closed above 20,000. The stock market has been rising since Donald Trump's election. The Dow is up more than nine percent, and the broader S&P 500 is up more than 7 percent. As NPR's Chris Arnold reports, investors are betting that the Trump presidency will be good for big companies and for the economy as a whole.

CHRIS ARNOLD, BYLINE: One reason investors keep bidding up stock prices seems to be that the president has said and done a bunch of things that the stock market likes. He's talked of cutting taxes, a big infrastructure program, less regulation. He's chosen top executives from industry and finance for Cabinet positions. Juli Niemann is an analyst with Smith Moore and Company.

JULI NIEMANN: What we have going on now is a huge optimistic rally that this is pro-growth, pro-USA. And money is just going to start pouring into the economy, so it's a tremendous amount of optimism. The only fudge factor, though, is a lot of unrealistic optimism out there as well.

ARNOLD: Other market watchers agree that investors are probably a bit over excited. David Kotok is chief investment officer of Cumberland Advisors. He says, OK, let's take infrastructure spending. That could be good.

DAVID KOTOK: It's a great idea to rebuild airports like LaGuardia in New York and to fix bridges and fix roads and schools and sewer plants and so forth. No one objects to those issues.

ARNOLD: That could create a lot of jobs and get money flowing like Niemann was talking about. There's no lack of old, rundown bridges to fix, but...

KOTOK: How do you pay for them?

ARNOLD: Part of Trump's plan for how to pay for them is to lower corporate taxes. He wants to entice multinational corporations to bring more of their profits back to the U.S. and pay taxes here - that is, instead of stashing the money in tax havens around the world. But Trump can't do that by waving a magic wand. It very well could be a long, protracted debate in Congress.

KOTOK: So Trump is going to learn that when you govern as president, you're not the king and the czar, but you also have to deal with the United States Senate and the House of Representatives.

ARNOLD: But both Niemann and Kotok say investors are pricing stocks as if those pro-growth policies are going to get enacted quickly and spur bigger earnings.

KOTOK: What if that all doesn't come together? In that case, the market has gone too far too fast.

ARNOLD: OK, so what should the everyday investor do now that the Dow has crested 20,000? We talked to Daniel Egan, the director of behavioral finance and investing at betterment.com. It's an online financial adviser. We should also say they've been an NPR sponsor. And as the Dow approached 20,000, this supposed milestone, Egan was not on a trading floor. He was home giving his baby a warm bottle.

(SOUNDBITE OF BABY COOING)

DANIEL EGAN: OK, come here. We're going to do this. Come here, you.

ARNOLD: Egan says all the hoopla could be used as a reminder of the importance of what's called rebalancing your portfolio. Say you have a long-term financial plan of holding 50 percent in stocks, the rest in bonds and real estate. When stocks surge like they just have, you might have 55 percent of your holdings in stocks, so you sell some stock to get back to your target 50 percent. That's the rebalancing part. Egan says, though, that people often don't like to sell stocks when they're rising.

EGAN: It's like taking your best football player off the field right after he's been doing amazingly well.

ARNOLD: But Egan says you want to buy stocks low and sell them high, and that's part of what rebalancing does. Egan recommends setting up automatic rebalancing four times a year so you can forget about the market and spend more time with your baby or your family. Chris Arnold, NPR News.

(SOUNDBITE OF DEER TICK SONG, "TWENTY MILES")