If you have been paying attention to the financial media over the past six months, you have likely heard several economists predict that the Dow Jones Industrial Average will soon surpass the 20,000 mark. It would be a monumental event for the Dow as well as the stock market as a whole.
Though the fairly rapid inflation of our currency has played a part in the long-term bull run, the general growth of free market competition can also be considered a major factor as well.
The hot question on the street is whether the Dow will hit 20,000 by the year’s end. Let’s take a look at why so many investment analysts are bullish on the Dow in the short-term and the long-term.
Making a Case for Dow 20,000 by the Beginning of 2017
Plenty of stock market gurus are predicting the Dow to end the year on a high note. Some anticipate double digit gains to round out the year aright and put the index right around the 20,000 mark.
The average of all year-end price targets predicted by Wall Street analysts is at a whopping 20,003.93. This is an excellent sign for the remainder of the year as well as the short-term future as the U.S. economy continues to bounce back out of the recession.
The same analysts have an average price point gain prediction of just under 8 percent. If the Dow performs this well, the increase would be slightly under 15 percent from January’s level.
The last time that stock market analysts had a consensus one-year price target for anywhere near 20,000 was back in July of 2015. The target never came to fruition. One year later, the Dow stood at 18,456.
However, it is likely that the Dow will continue its upward ascent and break through the 20,000 mark this year. The dollar is strengthening, employment numbers are gradually improving and consumers are spending with confidence.
The Dow Shows no Signs of Slowing Down
The Dow’s rapid rise throughout the last couple of decades has been quite impressive. The index first hit the 10,000 mark in March of 1999. As long as earnings and monetary policy don’t bring any major surprises, the Dow will likely continue an upward ascent toward the 20,000 mark.
The question is whether the market will eclipse 20,000 by the end of the year or even if it matters to begin with. It is important to note that the Dow has gone on to conduct quite the impressive run after suffering a harsh post-Brexit dip.
All in all, the Dow is up around 8 percent since the final week of June. Even if the Dow ends up at 19,900 and change by year’s end, the fact that it approached the 20,000 mark toward the end of the year will have been what mattered the most. It will represent the breaking of new ground and provide investors with something positive to look forward to in 2017.
20,000 is Less Than 10 Percent Away
The prospect of the Dow hitting 20,000 does not seem so unreasonable when you consider that breaking through this threshold would represent a gain of about 8 percent. Sure, an 8 percent increase in the next half year or less is an aggressive outlook yet it is certainly possible.
If global investors continue to view European stocks as high-risk, more money could continue to pour into U.S. Investments and consequently boost the value of the U.S. dollar. Add in the fact that there are some serious concerns about the health of China’s economy and it is easy to see why so many have a bullish outlook for the Dow and other U.S. markets from now until the rest of the year and beyond.
In the end, stocks present the most potential for profit when bonds and banks are offering little if any return. The U.S. markets have become a safe haven of sorts, at least for the short-term as all of the Brexit fallout settles. Even slow growth is welcomed as opposed to no growth and that is precisely why so many investors are putting money into American markets.
In the end, an 8 percent bump in the final quarter and a half does not seem unrealistic. There should be no doubt that the Dow can reach and break through the 20,000 benchmark by the end of the year.
Regards,
Ethan Warrick
Editor
Wealth Authority
