Taken from the November 2018 Issue of Millionaire Portfolio
Dow at 40,000?
As part of BCI’s commissioned projects in corporate finance, I have to keep abreast of environmental influences on global markets.
Recently, I came across a number of economists who argue that the Dow Jones will rise by 70% to 100% over the next seven years, which peaked my interest, given the previous articles submitted.
So, here are some simple reasons:
- The Dow Jones only needs to increase by 6.8% a year to hit the 40,000 mark by end- 2025.
- Notably, this rate of increase is less than the post-war — less than the post war average of 7.2%.
- Most economic indicators are positive, with consumer and SME confidence.
- Corporate spending is also increasing.
Trader lesson: Acquiring equities for the long-term will see solid profits.
These economists are extremely positive that the current bull will continue until it hits 40,000.
For me, the discussion became more interesting when one economist pointed out that the current bull market hasn’t been running as long as most people think.
The popular pundit belief is that the current bull started in 2009. Some argue that 20% falls in many indices between 2015 and 2016 suggest that the bull actually started in 2016.
This means that the bull run is only two years old – with much steam left to hit the 40,000 mark.
Economists suggest that pessimists look at the following factors before crying out doomsday market crashes.
- High residual demand for housing, which is still not met.
- Leading economic indicators are positive and forecasts are as positive.
- Consumer confidence is positive.
- Corporate spending is strong.
- SME optimism is strong.