Dow Jones could hit the 40,000-point level next year, analyst says

The Dow Jones Industrial Average stock index has the potential to reach the 40,000-point mark in 2021, according to Patrick Spencer, the vice chair of equities at investment bank Baird. He explained on CNBC’s “Street Signs Europe” Wednesday that the index contained more value than growth stocks, and expects the former to outperform while the latter stabilizes.

“So there’s still a lot of despondency, a lot of reticence with regard to going into the market and they are still pretty unloved generally, equities,” Spencer said Wednesday, revealing that discussions at his firm had touched on a possible surprise surge for the Dow. “We talk about maybe 40,000 level on the Dow there next year because of the make-up of that index which is more value than growth,” he added, without giving a detailed target on when that might happen.

The Dow Jones closed at 29,783 points on Tuesday and has risen by over 4% so far this year despite the coronavirus crisis. Stocks have seen a strong rally in the last few weeks on vaccine hopes, and Spencer’s call would represent a climb of nearly 35% from current levels.

Spencer argued that the Dow Jones rally still had further to run next year. He pointed out that there was $6.5 trillion sitting in money market accounts, which are funds invested in short-term debt and cash. He also highlighted that despite a recent record investment in exchange-traded funds, which track stock markets, there had been more people selling out of ETFs this year than money going in.

With a lot of people “hiding in cash,” Spencer said equities remained out of favor and therefore believed markets would surprise investors next year to the upside.

Dow Jones could hit the 40,000-point level next year, analyst says, CNBC, Nov 18