What Does Dow 25000 Mean for the Stock Market
Dorfman Value Investments founder John Dorfman likely triggered plenty of smirks when he boldly predicted four-and-a-half years ago that the Dow Jones industrial average would hit 25,000 in 2017. However, investor optimism about a booming U.S. economy and the potential for a massive corporate tax cut pushed the Dow higher by another 140 points on Monday, putting it within striking distance of 25,000.
At the time Dorfman made his bullish call in 2013, the Dow was trading just under 14,500. However, over the past four-and-a-half years, the U.S. stock market has climbed steadily higher, and the Dow has gained roughly 10,000 points during the incredible run.
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To Dorfman's credit, things have played out almost exactly like he said they would.
"We've had 12 years of subpar growth," Dorfman said on CNBC in March 2013. "We've had 12 years of up and down with little net progress in the markets, and people have forgotten what a strong economy and what a secular bull market look like."
Following Monday's big gain, the Dow stands at 24,792 with just under two weeks remaining in 2017. It now seems Dow 25,000 by the end of the year is a real possibility.
But as wild as the bull market ride has been, the general consensus on Wall Street is that the Dow may not stop at 25,000. Morgan Stanley recently predicted the Standard & Poor's 500 index will hit 2,750 in 2018, another 2.2 percent gain from current levels. Goldman Sachs is even more bullish, predicting 2,850 for the S&P 500 next year, another 5.9 percent gain.
"Our 'rational exuberance' rests on a combination of above-trend U.S. and global economic growth, low albeit slowly rising interest rates and profit growth aided by corporate tax reform likely to be adopted by early next year," Goldman Sachs analyst David Kostin says.
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As for Dorfman, he's still bullish on U.S. stocks as well.
"My best guess for 2018 is that the market will achieve high single-digit gains, but with more volatility than we have seen the past three years," Dorfman recently wrote.
After gaining another 2 percent in December, the SPDR Dow Jones Industrial Average (ticker: DIA) exchange-traded fund is on track to finish 2017 with an impressive 20.8 percent full-year gain.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
