Tags: Barrons | Dow | 15 | 000 | Years

Barron's: Dow Could Hit 15,000 in Two Years

Monday, 13 February 2012 08:30 AM

The Dow Jones Industrial Average stands a good chance of hitting 15,000 in two years, up over 2,000 points from today's levels, Barron's reports.

"Based on cyclical patterns of market history, the odds are better than two chances in three that the Dow Jones Industrial Average will reach 15,000 or higher over the next two years," Barron's reports.

"Based on the same cyclical patterns, there's about a 50-50 chance that the Dow could hit 17,000 or more." The Dow closed Friday at 12,853.

Citing research from Jeremy Siegel, an economics professor at the University of Pennsylvania's Wharton School, Barron's reports that if Europe avoids a meltdown and if the U.S. economy keeps growing, corporations will see their share prices soar, as earnings have performed better than stock prices so far.

Cyclical factors play a role as well, as historically, intervals marked by worse-than-average returns tend to slingshot into periods of better-than-average returns.

"Since the past five years have been squarely in the worse-than-average category, better-than-average returns in the two-year period just begun are now likely," Barron's reports.

"The stock market enjoyed double-digit earnings growth in 2011, yet barely rose in response, mainly because of fears over the health of the domestic economy and contagion from Europe," Barron's adds.

"Now that those fears have begun to subside, the market's upside potential can be unleashed."

Calls from high-profile investors to get into stocks now have been growing lately.

Warren Buffett has said stocks are attractive, while billionaire hedge fund manager David Einhorn has said that stocks are priced too cheaply.

"Our current strategy is to own cheap stocks of good businesses, largely in the United States," Einhorn writes in a January note to investors, according to CNBC.

"We are more net long equities than we have been in some time, as we believe that many stocks have reached a point where they are simply cheap enough to own even if some trouble awaits us."

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Monday, 13 February 2012 08:30 AM
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