As you may know we believe a long term secular bull market is in the works, but not necessarily fully underway. The next 3-5 years promise to be difficult for the global economy and the market. So enjoy it while you can. A major pause or two over the next few years is quite likely from an historical perspective.
While we expect this bull still has legs through Q1 2014, we suspect a more sizeable correction to transpire in 2014, perhaps in the 10-20% range. We have not had any major correction since 2009. The minor cyclical bear market in 2011 had little lasting impact. Investors Intelligence Bullish Advisor sentiment was recently at a 6-year high, while the bears reached a 26-year low two weeks ago. Though we do not believe the time has yet come to become contrarian.
Back in 2011 when my book Super Boom: Why the Dow Jones Will Hit 38,820 and How You Can Profit From It (Wiley) hit the stores I drafted a bold 15-year DJIA projection chart. This forecast does not anticipate DJIA reaching 38,820 until around the year 2025 – and for the current secular bear market that began in 2000 to drag on until 2017 or so before the next boom and secular bull commences. I updated both the long term historical chart and my forecast for the next 12 years today. Here is the updated history.
Click chart to enlarge…
When I first made my super boom forecast in May 2010 in this space DJIA was around 10,000, unemployment was quite high, the great recession was barely in the rearview, and global debt was a new and growing concern. So my prediction that the Dow would reach 38820 by 2025 seemed absurd to many when we announced it. That came as no surprise—all bold predictions are first lambasted before proven true. This super boom is not only plausible, but mathematically and historically within reason. Now that DJIA is almost 17,000 it looks even more credulous.
But now that DJIA has pushed substantially above the high range of that chart (not because of a massive global economic boom or peace, but because of unprecedented easy monetary policy), I have raised the floor on my initial forecast. The end game still is in play and the means to the end has only been elevated to account for this new easy money world. We still expect some tough sledding over the next few years in the market.
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