The Market Is Actually Behind Where It Should Be

Peter Cohen, the CEO of Cowen Group, likely won't be wearing one of those Dow 20K hats like the ones seen on the floor of the NYSE back in 1999. Why not? Because it really isn't any reason to celebrate.

According to Cohen, the Dow hitting the 20,000 mark this year implies the index is lagging where it should be on a historical basis.

Cohen said during CNBC's "Halftime Report" segment on Wednesday that the Dow was trading at 786 nearly 48 years ago when his career began. Taking the index at 786 and compounding it at 7 percent for 48 years yields an index value of 20,000 today. The problem is the historical return on equities stands at around 9 percent a year over the past 100 years, which implies "we are a little bit behind."

"20,000 is an interesting number," Cohen continued. "But it's not so unusual."

Cohen did acknowledge that the stock market is experiencing a sense of optimism as a byproduct of the U.S. election. Speaking of the election, the investment pro suggested that a combination of President-elect Donald Trump's tax reform, infrastructure building and financial deregulation will all contribute to a productive business environment moving forward.

Image Credit: By The Central Intelligence Agency [Public domain], via Wikimedia Commons