The Dow Jones Industrial Average will top 36,000 at some point. It’s not much of a forecast because the Dow is currently trading at 35,645, and it surpassed 36,000 only a few weeks ago. However, in 1999, authors James K. Glassman and Kevin A. Hassett projected the Dow would soar above 36,000, which they outlined in their book Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market. It was a bold prediction because the Dow was trading at 10,700 at that time. They argued that stocks were undervalued, and the index would triple in value over the next few years. When they made their prediction, the Dow had soared 168% from 1995 to 1999, averaging 24% per year. How did their prediction turn out?
The Dow peaked about a month after their book was published, and by 2003, the index dropped 23%. It did rebound before crashing again in 2008 to a low of 6,875. Twenty-two years later, their prophecy rang true as the Dow breached 36,000.
Dow 36,000 doesn’t have any shock value today, but how about Dow 250,000? What is your reaction to the index soaring 600%? If the market were to jump seven-fold, how would you allocate your portfolio today? Would you buy stocks or bonds? Would you worry about market corrections?
Why Dow 250,000? Dow 250,000 is a twenty-year goal if the index rises 10% per year. Since 1915, stocks averaged 6.3% per year without dividends.[1] If we included dividends, the average annual return would have been 10%, so my target is not far-fetched. Will the Dow best 250,000? Who knows? It might. If I’m half right, the index will triple from today’s value.
The Dow has tripled since Messrs. Glassman and Hassett published their book despite several recessions, numerous market corrections, rising interest rates, falling interest rates, high inflation, low inflation, and four different presidents – two Democrats, two Republicans.
The stock market rises about three-quarters of the time, so don’t worry about short-term moves. Instead, follow your plan, invest often, and let the long-term trend of stocks grow your wealth.
Prediction is difficult – particularly when it involves the future. ~ Mark Twain
November 24, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
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[1] https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart