Spanning trees of low average stretch on the non-tree edges, as introduced by Alon et al. [SICOMP 1995], are a natural graph-theoretic object. In recent years, they have found significant applications in solvers for symmetric diagonally dominant (SDD) linear systems. In this work, we provide the first dynamic algorithm for maintaining such trees under edge insertions and deletions to the input graph. Our algorithm has update time $ n^{1/2 + o(1)} $ and the average stretch of the maintained tree is $ n^{o(1)} $, which matches the stretch in the seminal result of Alon et al. Similar to Alon et al., our dynamic low-stretch tree algorithm employs a dynamic hierarchy of low-diameter decompositions (LDDs). As a major building block we use a dynamic LDD that we obtain by adapting the random-shift clustering of Miller et al. [SPAA 2013] to the dynamic setting. The major technical challenge in our approach is to control the propagation of updates within our hierarchy of LDDs: each update to one level of the hierarchy could potentially induce several insertions and deletions to the next level of the hierarchy. We achieve this goal by a sophisticated amortization approach. We believe that the dynamic random-shift clustering might be useful for independent applications. One of these applications is the dynamic spanner problem. By combining the random-shift clustering with the recent spanner construction of Elkin and Neiman [SODA 2017]. We obtain a fully dynamic algorithm for maintaining a spanner of stretch $ 2k - 1 $ and size $ O (n^{1 + 1/k} \log{n}) $ with amortized update time $ O (k \log^2 n) $ for any integer $ 2 \leq k \leq \log n $. Compared to the state-of-the art in this regime [Baswana et al. TALG '12], we improve upon the size of the spanner and the update time by a factor of $ k $.