Dow 50K in 2024?
Can the world’s most famous stock market hit another big round number next year?
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, in the wake of 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 big level to watch. Humans are 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. Over its history, the Dow’s average annual return has been 8.7%. It wouldn’t need a remarkable surge to hit the 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 wonderful returns since the financial crisis ended in 2009. They have hugely 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 huge cashflows of over $400 billion that continue to attract flows of investors’ cash.
Ultimately, earnings drive stocks. US stocks continue to do well versus their peers elsewhere because the earnings of US stocks are showing better growth than those elsewhere. In addition, 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 destination for the index within the coming year. History shows that record highs tend to be followed up 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.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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