The Dow at 50,000. How It Could Happen -- and When.

Barron's · 2024-09-20 15:15

By Paul R. La Monica

The venerable Dow Jones Industrial Average hit an all-time high, topping 42,000 Thursday before pulling back a bit Friday. It might seem like a pie-in-the-sky prediction to say the index could soon top the 50,000 level, but that is less than a 20% gain away.

The Dow has topped other round number milestones pretty routinely in the past few years. It seems like only yesterday the blue chip index hit 20,000 in January 2017. (I still have a Dow 20K hat hanging in my home office.)

The Dow first topped 30,000 in late November 2020, according to Dow Jones Market Data. It then surpassed the 36,000 mark -- a level made famous in a 1999 book by James Glassman and Kevin Hassett, who predicted the Dow would reach 36,000 in the early 2000s. It notched that record in November 2021. The index hurdled over the 40,000 threshold this May.

So what would have to happen for the Dow to cross the 50K barrier?

Because the Dow is a price-weighted average and not a market-cap weighted index like the S&P 500, each of the individual stocks would need to rise about 19%.

That would put UnitedHealth, the Dow's largest component by price, at just under $687 a share. Intel, the smallest weighting in the DJIA, would have to trade for a little more than $25. (This assumes the struggling chip maker is still in the Dow by the end of next year. There's a case to be made for Nvidia to replace it.)

Of course, not all Dow stocks are going to move in equal fashion. There will be bigger winners -- and losers. Just look at this year. Walmart and American Express were each up more than 40% through Thursday's close. Nike had fallen more than 25% as of Thursday before rallying 6% Friday due to its CEO change. Deeply troubled Boeing has plummeted more than 40%. And Intel, despite its recent rebound, is still down almost 60% in 2024.

So trying to predict when the Dow might top 50K assumes a lot of guesswork. But let's take a shot anyway. It is worth noting the Dow is currently trading around 18 times 2025 earnings estimates, according to FactSet. That is below its peak P/E of 21. Assume, for argument's sake, the Dow stocks enjoy some multiple expansion.

Based on earnings estimates for the SPDR Dow Jones Industrial Average ETF, whose current price of about $419 is roughly 1/100th of the value of the Dow, the index would hit about 46,000 next year at a P/E of 21. That is a nearly 10% gain from current levels, a normal-size return. The Dow is up about 11% so far this year for context.

Expecting another double-digit gain in 2025 might be overly aggressive, though. The Dow would reach a level of only 44,515 if each stock hit its average analyst price target for the next 12 months, according to Dow Jones Market Data.

Analysts are most bullish on this year's Dow laggards, including Dow dogs Boeing and Intel, as well as Chevron, Merck, and Disney. Analysts expect gains for each of these five stocks of around 18% to 36%.

Meanwhile, the Wall Street consensus targets for Amgen, Travelers, American Express, Caterpillar, and IBM all call for single-digit percentage declines in their stock prices.

Our best guess? Don't hold your breath expecting the Dow to pass 50K in the next few months. But as long as the Federal Reserve can stick a soft landing for the economy and profit growth remains relatively solid, Wall Street can probably get those Dow 50,000 hats ready for sometime in 2026.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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September 20, 2024 15:15 ET (19:15 GMT)