By Jacob Wolinsky. Originally published at ValueWalk.
August 17, 2020 Update: A new survey suggests the average investor is excessively optimistic—so optimistic, in fact, that they see the Dow Jones Industrial Average (INDEXDJX: .DJI) at 52,000 in only five years.
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MarketWatch reported on the survey, which was conducted by money-management firm Schroders. The firm surveyed 23,450 private investors in 32 different countries, including 1,500 people in the U.S. U.S. investors are even more investors than those in other countries.
The average investor expects stock prices to continue skyrocketing, putting the Dow Jones at around 52,000 after accounting for dividends. The average investor predicted a return of 15.4% per year for the next five years.
How The Dow Jones Industrial Average Works
The Dow Jones Industrial Average (INDEXDJX: .DJI) has fallen off a cliff the past few weeks. The index is up almost 5% in trading on March 13th 2020, but that is still several thousand points below the recent high. The DJI is currently trading at 22,188.26. Previously, the Dow climbed to a new record high at 29,408 in early February before pulling back not long after the market opened. However, as the day rolled on, the index flipped back into the green.
The Dow Jones was up about 84 points amid further progress in the trade talks between China and the U.S. China plans to slash in half its tariffs on some $75 billion of imported U.S. goods starting on Feb. 14. It’s the first step in the nation’s phase-one trade resolution with Washington. Tariffs on many goods will be cut from 10% to 5%, while other goods’ tariffs will be slashed from 5% to 2.5%, according to China’s Ministry of Finance.
INDEXDJX: .DJI: Previously
Commenting on today’s trading which saw the Dow Jones INDEXDJX: .DJI near 29000, Gorilla Trades strategist Ken Berman said:
It seems that the resilience of domestic stocks continues to be impressive. Indeed, it only took a few days to completely erase last week’s scary sell-off. It wasn’t that long time ago that we celebrated Dow Jones Industrial Average (INDEXDJX: .DJI) 28000, and thanks to today’s broad rally, the industrial average got very close to topping 29000, and bulls already have the historic 30,000 level in their crosshairs.”
Q4 2019 hedge fund letters, conferences and more
The major indices all finished in the green for the second day in a row, and the large-cap benchmarks also closed at their highest levels ever. Equities were boosted by the de-escalation between the U.S. and Iran. The Dow Jones (INDEXDJX: .DJI) was up 212, or 0.7%, to 28,957, the Nasdaq gained 74, or 0.8%, to 9,203 while the S&P 500 rose by 22, or 0.7%, to 3,275. Advancing issues outnumbered decliners by an almost 3-to-2 ratio on the NYSE, where volume was slightly above average.
Even though the major indices finished below their intraday highs. This was due to a shallow afternoon dip. However, all of the key sectors gained ground, with even the defensive utilities edging higher. Tech stocks, consumer goods, and services were the strongest issues, which is as healthy as it gets when it comes to bull market rallies. The relative weakness of small-caps was the only major red flag today. This was despite the fact that large-caps continue to hit record highs, the Russell 2000 remains much weak from a technical perspective.
Dow 29000 Indexdjx:.DJI this week?
The Volatility Index (VIX) hit its lowest level since last week’s airstrike. Additionally, short interest continues to decline on Wall Street. Analysts agree that there is no lack of risk appetite among equity investors. That said, we did have several short-lived pullbacks in recent weeks. These downturns ensure that the positive sentiment hasn’t turned into exuberance. In fact, the positive shift in global economic trends provided another boost for stocks, just after the trade agreement between the U.S. and China. The lofty gains will eventually lead to a deeper correction, until the bullish catalysts keep on coming. In the meantime, the foundation of the rally remains solid.
Iran in focus
The traditional safe-haven assets, such as Treasuries, Silver and gold all declined today, and the price of oil also continued to fall in the face of the improving economic outlook, as the odds of a new military conflict in the Middle East declined. President Trump unexpectedly called for the resumption of the talks with Iran. While the hardliners in the Persian state called for revenge, downplaying the effects of yesterday’s missile attacks. However, the two sides seem to be steering away from a major conflict.
The government jobs report will likely steal the show tomorrow. Volatility could already spike higher in pre-market trading because of the release. All eyes will be on the non-farm payrolls figure following last month’s blowout reading of 266,000. This week’s bullish ADP payrolls number also indicates further gains. The unemployment rate is expected to be unchanged at 3.5%, while hourly earnings are forecast to rise by 0.3%. As the global economy has been showing signs of life in recent weeks, Treasuries yields could explode higher. Yields will follow if the U.S. labor market continue to show robust growth.
Dow (Indexdjx:.DJI) 29000 next?
Thanks to five consecutive bullish months, Apple’s (AAPL) stock achieved yet another technical milestone, passing the $300 per share level yesterday. Apple lost the title of the most valuable public company due to the IPO of the Saudi oil giant Aramco. However, Apple took over Microsoft (MSFT), while crossing $1.3 trillion in total capitalization. The stock hit another record high today, and it’s well above both its moving averages. However, an orderly pullback of the INDEXDJX: .DJI could happen anytime. Apple is still likely to lead the way higher in 2020. Stay tuned!
The post Survey puts Dow Jones Industrial Average at 52k in 5 years appeared first on ValueWalk.
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