Dow 1,339,410: The Latest Milestone

This week, the Dow Jones Industrial Average closed above 13000 for the first time in almost four years. If you told yourself, “It’s just an arbitrary number,” you were right.

Round numbers on stock indexes are meaningless in themselves. But they aren’t a bad pretext for putting stock indexes in perspective—and that exercise might give you a less-jaundiced view on the market.

The Dow closed at 13009.12 on Tuesday, its highest level since May 19, 2008, and flickered around 13000 the rest of the week. It is easy to see why many investors shrugged and stayed on the sidelines: That was the ninth time since 2007 that the closing value of the Dow had climbed across the 13000 milestone, according to the WSJ Market Data Group. Along the way, the index had sunk below (and bounced back over) the 12000, 11000, 10000, 9000, 8000 and 7000 thresholds more than 300 times.

Earlier last month, the blogger Tadas Viskanta of AbnormalReturns.com angered some investors with a post titled “There Has Never Been a Better Time to Be an Individual Investor.” He says much of the online chatter about his post harked back to the 1990s, complaining that those—not these—should be considered the glory days. After all, the Dow is more than 1,000 points below its record high of 14164.53 in October 2007.

But there is a good case to be made that the Dow has never been higher—and that Mr. Viskanta is right. The Dow industrials, since their launch on May 26, 1896, have been reported as a “price-only” index that doesn’t capture the dividend income of the underlying companies. The same is true for most major stock indexes.

So I asked Meir Statman, a finance professor at Santa Clara University, and Jonathan Scheid, president of Bellatore Financial, an investment firm in San Jose, Calif., to calculate where the Dow would be today with all dividends reinvested back into the index. Counting dividends, the Dow would have closed this Tuesday at 1339410.97—more than 100 times above its official close.

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