Just Ahead: Dow 40,000?
Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com. He's also a regular contributor to RealMoney, TheStreet.com's subscription site. If you'd like to see all of Jon Markman's RealMoney commentary, click here for information about a free trial.
The professional Wall Street spin machine has kicked into overdrive in the past two weeks. A slew of strategists have stridden into the teeth of Hurricane October with forecasts saying stocks in the final three months of this year will clock in with a juicy 8% gain -- equal to the average fourth-quarter gain over the past decade.
As you might expect, there is plenty of bearish dissent, and the doomsayers certainly appear to have the upper hand of late. But more remarkable, perhaps, is a growing minority of forecasters who are looking for much, much better results.Louis Navellier, the fund manager and newsletter publisher, is typical of the mega-bulls, advising private clients over the past weekend that their "best buying opportunity in six months" was last Friday. "If you have any cash, invest it right now," he wrote. "The next few weeks will be phenomenal." More objectively, the quantitative team at Thomson Financial put out a note on Monday stating that their Market Model Risk Premium -- which gauges the extent to which investors are so worried about the future that they are overpaying for the safety of government bonds -- has risen to a record level that tied a mark set in September 2002. That was, as the Thomson research team pointed out, an "excellent buying opportunity."
The Dow at 40,000?Yet even these sound like doomsday scenarios compared with a cadre of analysts who argue that stocks are actually on the verge of a historic breakout. They say their calculations suggest the Dow Jones Industrial Average, now at 10,200, will rocket to 20,000 to 40,000 over the next three to five years, driven by improving global income levels, a boost in the money supply and the deployment of vast quantities of hoarded cash by companies and individuals.
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