After a rotten year, let’s look ahead to bigger and brighter things. Like when we might get Dow 40,000, S&P 5,000 and Nasdaq 20,000. They might be closer than you think.
2020 is mercifully almost over. It’s not worth dwelling anymore on what will hopefully be the most challenging year any of us experience. Let’s look forward, shall we? 2021 is shaping up to be a much better year. In fact, the next few years could be increasingly joyous as we (hopefully) start to put Covid-19 in the rearview mirror. As we do, the global economy will recover, and stock returns will likely accelerate. With that in mind, here’s a fun question to contemplate: How long will it be until we get to Dow 40,000, S&P 5,000 and the Nasdaq 20,000?
Right now, those benchmarks seem really far off. But they might be closer than you think.
Remember when Dow 20,000 was such a huge milestone? That was less than three years ago. Now it’s at 30,000—despite the fact that the Dow has been the slowest-rising of the three major stock market indexes. Granted, a 50% bump in just under three years is unlikely to be replicated, especially not while the coronavirus continues to run rampant and many businesses are still shuttered. But a 33% jump in three years? Given the massive economic recovery that could take place in that time, it doesn’t seem far-fetched.
Ditto the S&P 500 getting to 5,000.
The only, and I repeat, the only flaw I can see in this stock is that few investors know about it. Yet, it is making money hand over fist behind the scenes and it has been for years.
Why, long before COVID-19 hit, this stock was on a tear, handing investors 100% more profits than Amazon, Apple, Facebook and Google—that’s 230% to 76%, 105%, 16% and 32%, respectively.
This company’s market leadership will continue for years to come.For details, click here.
Heck, the large-cap index hasn’t even gotten to 4,000 yet, though it would only take another 8.6% push to get there – less than the 12.2% return of the past three months. To get to 5,000 would require a 35.8% bump – less than the 45% increase since the beginning of 2019.
As for Nasdaq 20,000, that would take a heftier 57% advance. But remember, the Nasdaq – heavy on the tech stocks that have led this year’s post-March recovery and been leaders of this decade-long bull market – moves much faster than the benchmark S&P 500 and the stodgier, dividend dinosaur-heavy Dow. It’s up 42% this year alone and didn’t even cross the 10,000 barrier until June. Now, it’s already knocking on the door of 13,000. At this rate, Nasdaq 20,000 seems possible by mid-2022!
Of course, here’s the part where I remind you that past returns are not indicative of future performance. Even as we look toward brighter, post-Covid days, there are no guarantees that the stock market will automatically keep up its remarkable ascension. The Nasdaq in particular looks a bit overcooked, trading just under 22 times earnings, higher than it was at any point in the decade leading up to 2020.
In the short term, it’s very possible, if not likely, that stocks will pull back, perhaps right after the new year. After such a big run since March, some sort of market correction would be normal, especially given the current circumstances.
But chances are, stock prices will be higher a year from now than they are today. Perhaps significantly higher.
I doubt the Dow, S&P and Nasdaq will hit any of the aforementioned benchmarks in 2021. But 2022 seems very possible, unless the bull market comes to a screeching – and unexpected – halt.
Ultimately, however, big shiny numbers don’t really matter anyway when it comes to indexes. They’re convenient measuring sticks, and fun talking points. And maybe that latter characteristic is what matters most this year.
We could all use a little more fun these days. And there’s nothing more fun right now than looking at what will hopefully be a much brighter future.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!