Tags: Sanchez | Dow | 20000 | compound

Investment Adviser Sanchez: Dow Won't Hit 20K for Another 6 Years

By    |   Tuesday, 04 November 2014 12:38 PM

Earlier this year, stock-market guru Jeremy Siegel of the University of Pennsylvania said the Dow Jones Industrial Average could reach 20,000 as soon as this year.

But Gina Sanchez, founder of investment advisory firm Chantico Global, thinks it will take a lot longer than that — to the tune of about six years.

The Dow closed at 17,384 Tuesday. So a move to 20,000 would represent a 15 percent gain. The index has gained 4.4 percent so far this year.

Since 2009, "the Dow has been compounding at a little over 12 percent [annualized]," Sanchez explained to CNBC and Yahoo Finance's Talking Numbers.

That exceeds the sum of nominal GDP growth and the Dow's dividend yield during that period. Thus Sanchez believes stock market gains will decelerate in coming years so that valuations fall more in line with fundamentals.

"If we're compounding well above trend, that suggests that we're going to have to compound well below trend in order for that to end up at about 6.5 percent, which is my expectation," she noted.

"If you start from 2009 and you compound at 6.5 percent [a year], we get to 20K in 2020."

Meanwhile, Vanguard Group founder Jack Bogle urges investors to ignore the stock market's recent volatility.

"Long-term investors simply are not affected by the comings and goings of the market," he told MarketWatch.

"As I have said before, the daily machinations of the stock market are like a tale told by an idiot, full of sound and fury, signifying nothing. One of my favorite rules is 'Don't peek.' Don't let all the noise drown out your common sense and your wisdom."

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Earlier this year, stock-market guru Jeremy Siegel of the University of Pennsylvania said the Dow Jones Industrial Average could reach 20,000 as soon as this year.
Sanchez, Dow, 20000, compound
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2014-38-04
Tuesday, 04 November 2014 12:38 PM
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