Investing.com Report on Market Growth

According to a recent report by Yardeni Research, both the S&P 500 and Dow Jones Industrial Average (DJIA) are poised for significant growth by the end of the decade.

Yardeni analysts predict that the DJIA could reach 60,000, while they believe the S&P 500 could surpass 8,000 by 2030.

Key Drivers of Growth

The key driver behind the S&P 500’s anticipated growth is earnings per share (EPS), which has consistently increased at a steady rate of 6-7% annually since the 1950s.

In Yardeni’s “Roaring 2020s” scenario, S&P 500 EPS could double to $400 by the end of the decade, with a price-to-earnings (P/E) ratio of 20, thus pushing the index past the 8,000 mark.

Yardeni notes, “The S&P 500 continues to rise along with its reported earnings per share,” and adds that the index’s trailing P/E ratio, though high, has been higher in the past and tends to dip during recessions, only to rebound afterward.

Optimism Amid Geopolitical Tensions

Despite current geopolitical tensions, Yardeni remains optimistic. Historically, geopolitical crises have often presented buying opportunities. However, they acknowledge that the stock market struggled during the “crises-prone 1970s.”

Yardeni advises investors not to let political views influence their decisions, stating that the market tends to rise regardless of the political landscape. The firm said, “The stock market tends to rise no matter who is in the White House and how much they’ve inflated the federal government’s debt.”

Historical Performance

Looking back, the firm states that the S&P 500 has averaged a 7.3% annual increase since 1928, with dividends further enhancing returns. Yardeni highlights that the market typically has more up years than down years, noting that historically, the worst months are February, May, and September.

Conclusion

Yardeni concludes that the duration of bull markets varies but generally, they tend to end before recessions and resume when an economic recovery seems likely.