Recession Watch or Dow 40,000?

Amid all the negative economic updates in the financial news lately, you might have heard some forecasters announce that the Dow Jones Industrial Average (DJIA) could top 40,000 in the next few years.

Regular viewers of my show “The Income Generation,” as well as regular readers of my blog and financial column, probably know how I feel about this, but when it comes to something as important as your retirement future, I think it’s worth looking into all possibilities.

The DJIA had achieved a record high closing on October 3, 2018—a record high which lasted until June of this year. That record high close was the culmination of 96 new record highs set since the 2016 presidential election. Although the Dow had traded mostly sideways until it was finally able to touch new highs at the end of June, some analysts believe the Dow will be able to avoid another major correction and hit 40,000 in the next few years.

But what is that forecast based on – and how feasible is it?

Besides experiencing the worst December ever, 2018 was the stock market’s worst year in a decade. Though the markets have managed to regain most of those losses, many wonder how much longer this run can continue.

In May 2019, fear regained control of the markets as Trump ramped up his trade war with China, and a flat yield curve triggered new fears of a recession.

Although the Dow and the markets have trended upward since recovering from their almost 60% correction in the wake of the financial crisis and Great Recession—I believe the drivers of that growth since 2009 have been mainly artificial.

I also believe the Dow and other indexes are overdue for another major sustained correction – and this one could be in the neighborhood of 40 to 70%.

Obviously,

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