Predicting Dow 20,000

I’m not one for making big market calls, but I got this one pretty close. This is from my CNBC appearance on July 12. Yesterday, the Dow got as high as 19,824.59. On July 12, it was at 18,372.12.

Brian: With the Dow hitting an all-time high on Tuesday, could Dow 20,000 be far ahead? And if so, what stocks might lead us there? Welcome to Trading Nation. I’m Brian Sullivan. Eddy Elfenbein of the “Crossing Wall Street” blog and Jonathan Krinsky of MKM Partners are with us.

Brian: You know, Eddy, ok…listen…we’re hitting a new high but 20,000 is still a long way away. I’m sure at some point in our lifetimes, hopefully, we will hit it. When do you think that might be?

Eddy: I think there is a very good chance it could happen before the end of this year.

Brian: This year?!

Eddy: Yeah, I think it’s very possible. You know, investing at the all-time high. Believe it or not, that’s a good trade. Historically, if you take the day after an all-time high and just squeeze all those together, it’s an 18% annualized gain. On top of that, the volatility is much, much lower. Plus, if you look at the Dow right now, 13 of the Dow stocks yield more than 3%. That’s two years’ work out of the 10-year bond right now.

Brian: You’re asking for…your new name, by the way, is Eddy Elfenbull…but another 18%? You’re asking for a lot, Eddy.

Eddy: I think it can be done. Particularly with the Dow, of course it’s price-weighting…a lot of those high-priced names, particularly in the financial sector, like Goldman, like JP Morgan — they look pretty good here. (Note: Since then, Goldman is up 51%. JPM is up 34%.) Also, in the tech sector, a lot of those names like IBM and Microsoft? The valuation — I think it’s pretty favorable.

Brian: Yeah, it’s actually about 10.5% so we’re being a little hyperbolistic there, but 10.5% is doable. There have been many years when we’ve done better than that, although we are halfway through the year. Jonathan Krinsky…

Posted by on December 13th, 2016 at 8:48 am


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