The Dow Is Likely to Hit 20,000 Sooner than We Initially Forecasted
by Seth Masters, AllianceBernstein
Four years ago, we predicted that the Dow Jones Industrial Average would reach 20,000 by 2022, in the median case. Since then, the economy and markets have done better than we forecasted. Based on todayâs conditions, we now expect the Dow to reach 20,000 by 2019.
Our forecast implies that stock indexes will rise relatively slowly from current levels, because valuations are now full and earnings growth is likely to be positive but low. Note that our forecast range of outcomes has shifted. We now see less downside risk than we did in 2012, and similar upside potential, as the Display shows. While there could be a bear market, there has been sufficient fundamental improvement since 2012, making the downside scenarios appear less dire.
In future posts, I will provide greater detail about our forecast, and discuss why we think Britainâs vote for a Brexit is unlikely to detail our the 20,000 Dow forecast, and what investors can do. This post was adapted from a white paper, âBREXIT: Roadblock or Speed Bump En Route to a 20,000 Dow?â
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.
The Bernstein Wealth Forecasting System uses a Monte Carlo model that simulates 10,000 plausible paths of return for each asset class and inflation and produces a probability distribution of outcomes. The model does not draw randomly from a set of historical returns to produce estimates for the future. Instead, the forecasts (1) are based on the building blocks of asset returns, such as inflation, yields, yield spreads, stock earnings and price multiples; (2) incorporate the linkages that exist among the returns of various asset classes; (3) take into account current market conditions at the beginning of the analysis; and (4) factor in a reasonable degree of randomness and unpredictability.
