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.
It’s been a tough year. 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 start to put Covid-19 in the rearview mirror thanks to accelerating vaccine rates and availability. 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 just over three years ago. Now it’s at 32,000—despite the fact that the Dow has been the slowest-rising of the three major stock market indexes, at least until recently. Granted, a 50% bump in three years is unlikely to be replicated, especially not while the coronavirus continues to swirl and many businesses are still shuttered. But a 22% jump in three years? Given the massive economic recovery that could take place in that time, it not only doesn’t seem far-fetched; it seems likely.
Ditto the S&P 500 getting to 5,000.
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Heck, the large-cap index hasn’t even gotten to 4,000 yet, though it might only take a good week – or even a good day – to get there. The S&P is, as of this writing, a mere 1.7% shy of 4,000, why would be a new all-time high.
As for Nasdaq 20,000, that would take a heftier 50% advance. But remember, the Nasdaq – heavy on the tech stocks that led the 2020 rally (though they’ve encountered turbulence in 2021) 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 96% in the last year already, and didn’t even cross the 10,000 barrier until last June. It crossed the 14,000-point barrier last month before retreating more than 10% in early March. Still, 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 has already hit a snag this month, and the 10% mini-correction could possibly be the start of a longer, more painful drawdown.
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 right now.
We could all use a little more fun these days. And there’s nothing more fun in today’s world 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!
*This post has been updated from an original version, published in 2020.