Is the Dow Jones Heading Towards New All-Time Highs in 2024?

12th April 2024

The year ahead holds significant potential for the Dow Jones Industrial Average (DJIA), with analysts predicting a trajectory towards new historical highs. While market analysts previously anticipated high-interest rates triggering an imminent recession that would dismantle the financial system in early 2023, Wall Street now envisions a soft landing for the US economy in 2024, propelling the market towards unprecedented peaks.

Understanding the Dow Jones

What is the Dow Jones? Established by Charles Dow in 1896, the Dow Jones comprises 30 of the largest and most influential US companies, representing various sectors of the economy such as technology, finance, energy, and healthcare. These companies are considered barometers of the US economy’s performance and its future prospects. Calculated using the weighted prices of the component stocks, the Dow Jones is widely used by investors to monitor the US stock market’s performance and as a benchmark for evaluating their investment portfolios.

Most analysts forecast that the Dow Jones index will rise in the upcoming year, anticipating the Federal Reserve to abandon its aggressive campaign of interest rate hikes. However, as with most New Year’s resolutions, stock market predictions often succumb to reality.

The imminent recession that analysts predicted last year? It never materialized. Instead, the economy continues to expand; inflation is tapering off, and stocks are heading towards year-end with double-digit gains.

Economic growth hovers around 3% in 2023, compared to the average annual growth of 1.8% over the past 10 years. It has been a rather robust recession we’ve had in 2023, one might ask.

In 2024, investors will grapple with a presidential election and geopolitical conflicts in Israel and Ukraine, any or none of which could influence the behavior of US equities.

We are likely nearing the end of the Fed’s rate-hiking cycle, but some analysts do not foresee rate cuts until the second half of 2024. The shape of the yield curve and the trajectory of growth will be key yield factors.

Strategists are divided on whether valuations are reasonable or somewhat rich. This debate will not disappear soon as valuations historically have signaled very little about short-term price action. Although most strategists agree that valuations are elevated, not everyone believes that this will prevent prices from rising further.

While conventional wisdom suggests that a rate cut enhances performance, historical data shows that investors might be rewarded more in a pause period, before a further reduction begins.

This year, strategists offer a rather wide range of opinions. Some see weakness. Some see strength. Forecasts for the Dow Jones price range from 34,000 to 45,000. This implies returns ranging from -8.5% to +20% from the new all-time highs of 37,000. For what it’s worth, the forecasts are not as skewed to the downside as they were in 2023.

2024 Predictions

The Dow Jones Forecast 2024 provides an overview of experts’ forecasts on how the US stock market could evolve over the course of the year. Predictions vary: Bank of America and Deutsche Bank are optimistic, forecasting Dow Jones growth to 39,000-40,000 and 40,000 points respectively, while JPMorgan is more cautious with a bearish forecast of 33,000 points. Morgan Stanley takes a neutral stance, with a forecast of 35,000 points. Goldman Sachs aligns with a neutral perspective, indicating a forecast of 37,000-38,000 points. Other financial institutions, such as Societe Generale and Wells Fargo, offer neutral forecasts of 37,500 and 36,000 points respectively. Technical forecast indicates an overvalued and technically overbought market, while prices forecasted by artificial intelligence models range from 33,000 to 48,000 points. Finally, financial analysts express opinions on individual index component stocks, such as UnitedHealth Group, Goldman Sachs, Microsoft, and others, providing specific price forecasts for these companies’ stocks.