Tags: Masters | Dow | 20000 | 2014

Sign of a Top? The Chorus Is Growing Louder for Dow 20,000

By    |   Friday, 13 December 2013 07:22 AM

The Dow Jones Industrial Average is going to hit the 20,000 mark sooner than expected — as soon as the end of next year — according to Seth Masters, chief investment officer at Bernstein Global Wealth Management.

In an interview with Yahoo, Masters accelerated his earlier timetable of 2020 for the Dow to hit that lofty target.

Now he thinks the Dow could go there by 2018, and perhaps as early as next year.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

Why the pie-eyed optimism? Masters said U.S. stocks are earning twice as much now as they did around the 2000 top, and the companies have about half as much debt than they did in 2007.

"The fundamentals underpinning the valuations of stocks today are quite strong," he said. "The reason why we're ahead of where we originally expected to be is because the economy approved a little more than we expected and also because P/E ratios have normalized more quickly than we thought.

"Also, balance sheets are extremely strong."

Today, stocks are trading at about 15 times earnings, but around the 2000 top, they were trading at 25 times earnings, Masters said.

Forecasting Dow 20,000 in 2014 may seem like a provocative assertion — and perhaps guaranteed to attract attention — but Masters is not the first prognosticator to call for it.

James Altucher, an investor, author, entrepreneur and managing director of Formula Capital, made the same assertion last March in an interview with Yahoo, also concluding that stocks are not trading at overvalued levels.

But when the Dow does hit 20,000 in 2014 or early 2015, Altucher predicted it would be time to "take some chips off the table. [By] 2015, 2016, I'm getting nervous. I want to be in cash."

Iconic investor Charles Schwab, a pioneer among discount stock trading firms, joined the Dow 20,000 chorus this week in an appearance on CNBC, although he did not specify 2014 as the target date.

"It will eventually reach that point. It may not be next year, but you gotta believe that equities are things that grow. It's innovation. It's new stores, new ideas, new things. That's where you get the benefit of the great American growth story, is through equities," Schwab predicted. "And so it's just a matter of time."

Neil Hennessy, CEO of Hennessy Funds, also placed himself squarely in the Dow 20,000 camp, but he said it may take three to five years to get there.

"While that might sound crazy, that would represent only about a 5% gain per year," Hennessy told Forbes.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

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The Dow Jones Industrial Average is going to hit the 20,000 mark sooner than expected — as soon as the end of next year — according to Seth Masters, chief investment officer at Bernstein Global Wealth Management.
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Friday, 13 December 2013 07:22 AM
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