Why the Dow is Going to 240,000
For years, I have been predicting that a new Golden Age was setting up for America, a repeat of the Roaring Twenties. The response I received was that I was a permabull, a nut job, or a conman simply trying to sell more newsletters.
Now some strategists are finally starting to agree with me. They too are recognizing that a ganging up of three generations of investment preferences will combine to drive markets higher during the 2020s, much higher.
How high are we talking? How about a Dow Average of 240,000 by 2035, up another 515% from here? That is a 40-fold gain from the March 2009 bottom.
It’s all about demographics, which are creating an epic structural shortage of stocks. I’m talking about the 80 million Baby Boomers, 65 million from Generation X, and now 85 million Millennials. Add the three generations together and you end up with a staggering 230 million investors chasing stocks, the most in history, perhaps by a factor of two.
Oh, and by the way, the number of shares out there to buy is actually shrinking, thanks to a record $1 trillion or more in corporate stock buybacks for the past decade.
I’m not talking pie-in-the-sky stuff here. Such ballistic moves have happened many times in history. And I am not talking about the 17th-century tulip bubble. They have happened in my lifetime. From August 1982 until April 2000, the Dow Average rose, you guessed it, exactly 20 times, from 600 to 12,000, when the Dotcom bubble popped.
What have the Millennials been buying? I know many, like my kids, their friends, and the many new Millennials who have recently been subscribing to the Diary of a Mad Hedge Fund Trader. Yes, it seems you can learn new tricks from an old dog. But they are a different kind of investor.
Like all of us, they buy companies they know, work for, and are comfortable with. During my dad’s generation that meant loading your portfolio with US Steel (X), IBM (IBM), and General Motors (GM).
For my generation, that meant buying Microsoft (MSFT), Intel (INTC), and Dell Computer (DELL).
For Millennials that means focusing on NVIDIA (NVDA), Netflix (NFLX), Amazon (AMZN), Meta (META), and Alphabet (GOOGL). Oh, and they like Bitcoin too (BITO).
That’s why the Magnificent Seven account for all of the past year’s monster gains.
There is another gale force tailwind pushing stocks up. The enormous profits created by artificial intelligence are essentially replacing the Federal Reserve as an unlimited source of liquidity. If you missed the quantitative easing and the free money of the 2010s, you get another pass at the brass ring. But you have heard me talk about this before so I won’t bore you.
There is one catch to this hyper-bullish scenario. Somewhere on the way to the next market apex at Dow 240,000, we need to squeeze in a recession. Bear markets in stocks historically precede recessions by an average of seven months. But for the time being, it looks like smooth sailing.
When I get a better read on precise dates and market levels, you’ll be the first to know.
