The Case for Dow 85,000

It may seem hard to believe that the Dow Jones Industrial Average could increase nearly five-fold over the next 15 years. But two top strategists have recently laid out a good case for the Dow hitting 85,000 by 2030.

In a recent piece for Proactive Advisor, David Wismer looks at a new book from Marshall and Trent Schield called Dow 85,000! Aim higher! “The Schields’ fundamental thesis is that big powerful bull markets (18-20 years or longer) are a ‘breed by themselves; not just rebounds in a secular bear,'” writes Wismer. “These new bulls, they say, are the result of the world changing in surprising ways that fundamentally alter the future. They come as a pleasant surprise to investors, gradually changing their pessimism to optimism, and driving prices to new highs that are hard to imagine at the onset.”

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Potential triggers for an ongoing big, lengthy bull include technology breakthroughs in domestic energy production, a manufacturing rebirth in the US, an improving deficit situation, and the demographic trend of peak-earning Millennials replacing aging Baby Boomers in the market, the Schields contend.

The Schields use active strategies that center on the idea of taking decisive action when their indicators say that a new trend is developing. “Using their proprietary methodologies, the Schields focus on sectors with the highest probabilities of market outperformance,” writes Wismer. They also use a “Market Environment Indicator” metric that measures trend and momentum for more 100 sector or industry groups. “By combining numerous indicators measuring the trend and momentum of all the underlying parts of the market, we believe MEI gives a more timely and accurate view of the market’s direction and health than looking at one or two indicators,” the Schields say. “No indicator is perfect—it is impossible to sell consistently at the exact top or to buy at the exact bottom. A successful risk management indicator, however, is: (1) right more often than wrong, and (2) leads to participating in large gains and avoiding large losses.”