2024 sees Dow Jones surpass 40,000, is 50,000 next?

​​​Dow powers higher

At the time of writing, the Dow Jones has risen almost 18% so far in 2024. This year has seen it breach the 40,000 level for the first time, three and a half years since it crossed the 30,000 level. In September, it reached 42,000 and 43,000 in October, before hitting 44,000 less than a month later, following the re-election of Donald Trump. A move through 45,000 is a distinct possibility before the end of the year.

Dow Jones chart

​50,000 now in sight

The 50,000 level is now the next significant milestone to watch. Humans are naturally drawn to such round numbers, though for an index like the Dow, 50,000 isn’t much different from 49,999 or 50,001.

At around 44,400, the index would need to gain about 12% to reach 50,000. Historically, the Dow’s average annual return has been 8.7%. It wouldn’t require a remarkable surge to hit this next big round number, and it may well reach 50,000 before the middle of 2025.

​Surely it can’t keep going up?

The Dow Jones has doubled since the COVID-19 low of April 2020. Indeed, from the COVID low until the end of 2021, the index gained 80%. By comparison, it is currently up 55% from the 2022 low.

United States (US) stocks have enjoyed substantial returns since the financial crisis ended in 2009. They have significantly outpaced the rest of the world, and the gap shows no sign of narrowing. The 30 constituents of the Dow include some of the largest companies in the world, with substantial cashflows of over $400 billion that continue to attract flows of investors’ cash.

Ultimately, earnings drive stocks. US stocks continue to outperform their peers elsewhere because the earnings of US stocks are showing better growth than those elsewhere. Additionally, compared to the rest of the developed world, the US economy is growing at a very healthy pace.

​Beyond Dow 50K lies even more milestones

Dow 50,000 is now a plausible target for the index within the coming year. History shows that record highs tend to be followed by further record highs. The current bull market is just over two years old, but the average bull market is usually closer to five years in length, using data going back to 1949.

​It’s only a number

Ultimately, these big round numbers are not particularly relevant. For investors and traders, the important thing is to focus on risk management and allowing winning trades to run.

Big round numbers like 50,000 and 60,000 command attention, but in the long run, the trend in earnings growth and in the index’s price is more important than any single figure.

GDP percentage growth in 2023