This problem was soon solved (speakeasies) by American innovation, which also created an unprecedented succession of life-changing products enabled by developing technologies: household appliances, movies, frozen foods, assembly lines that filled the roads with cars, and life-sustaining and -saving insulin and antibiotics, including penicillin. To make matters worse, the enactment of Prohibition made it hard for people to drown their troubles. The nation was still suffering from the aftermath of World War I and the multi-wave Spanish flu pandemic, estimated to have killed up to 50 million people worldwide, and about 675,000 Americans out of a population of about 100 million.Īll this set up a major recession and a steep market decline in 1920. But the Dow rose by 1,000.Ĭapitalism just keeps chugging along as Americans’ faith in their markets remains steadfast and foreign capital continues to stream in.īad news has long preceded periods of major economic and market growth. If you think the news was bad in 2020, consider 1920. More recently, in the six weeks between Thanksgiving and early January, we couldn’t have had worse news, with headlines on a new peak in the spread of the coronavirus. Skeptics complain that bad news will hamper growth, but over the past decade, and especially over the past year, the market hasn’t seemed to care about bad news the news is always bad. In 2018, I wrote an article projecting Dow 40,000 by 2025 and now that, too, seems conservative, given the rate of increase and the preponderance of powerful drivers. Skeptics said further jumps like this were unlikely, but here we are in early 2021 with the Dow over 30,000. That turned out to be conservative, as the Dow exceeded that mark in the winter of 2015 and hit 25,000 in the fall of 2017. Fast forward to 2010, when the Dow was at 10,000 and the nation was slogging through the Great Recession, indicators prompted my firm to project 20,000 by the end of 2020. Since I started in this business in 1981, the Dow has doubled five times, once every seven or eight years. Skeptics who regard Dow 50,000 by 2027 as pie in the sky need to wake up and smell the growth coffee they can drink when they have to eat this pie.Įven as the Dow has marched upward, these skeptics have deemed implausible projections that merely recognize average rates of ascent. Increments of the growth or decline of index members are divided by a fractional, 14-decimal-place constant, known as the Dow divisor, to determine the index’s levels of gain or loss. The Dow is a weighted index in which constituents’ growth or shrinkage are constantly quantified. market index, was designed to serve as a proxy for the broader market and, to some extent, the economy. Yet the same kinds of economic and market factors that have goosed rises in recent years-plus some new ones, including the post-pandemic recovery-will be at work. To some investors, this might seem unlikely. So, reaching 50,000 in six years, a 40% increase, is by no means a stretch. The DJIA (aka, the Dow) was hovering around 31,000 the last week of January-after tripling in 12 years. But when this happens, you really shouldn’t be astonished. market indices, after the Dow Jones Transportation Average.The Dow Jones Industrial Average, an index that has astonished with its ascent over the past decade, likely will continue to astonish through the 2020s, rising to 50,000 by 2027. The factor is changed whenever a constituent company undergoes a stock split so that the value of the index is unaffected by the stock split.įirst calculated on May 26, 1896, the index is the second-oldest among U.S. The value of the index can also be calculated as the sum of the stock prices of the companies included in the index, divided by a factor, which is approximately 0.152 as of November 2021. Furthermore, the DJIA does not use a weighted arithmetic mean. It is price-weighted, unlike stock indices, which use market capitalization. The DJIA includes only 30 large companies. stock market compared to a broader market index such as the S&P 500. Many professionals consider it to be an inadequate representation of the overall U.S. The DJIA is one of the oldest and most commonly followed equity indexes. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
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