Dow 28,000 may be a temporary resting stop before more powerful gains in early 2020.
Think Dow 30,000, suggests one investing legend.
“It’s quite possible you could see that happening,” Mobius Capital Partners Mark Mobius said on Yahoo Finance’s The First Trade. The former long-time top emerging markets strategist at Templeton says the groundwork is set for higher stock prices. “If you look at the incredible U.S. economy and how well it had done, it’s certainly reflective of what is happening in the stock market. What the stock market is telling us is that the economy will continue to do well.”
“Barring any major incident in the administration and assuming that Trump stays in the presidency I think the stock market will do very well and the economy will do well,” Mobius added.
Most on Wall Street have come out swinging high with their 2020 targets on the Dow, S&P 500 and Nasdaq. At the core of all the upbeat calls — which is common to kick off a new year — is a view U.S. economic growth will re-accelerate back above 2%. In large part, that is due to the Fed’s three interest rate cuts this year filtering their way into the economy via an increased pace of consumer spending and spending by companies on capital investments.
For instance, strategists at Goldman Sachs see U.S. GDP growth accelerating beyond 2% in 2020, reaching a pace of 2.3% in early 2020. The investment bank’s full-year average annual GDP growth estimate is 2.1%, ahead of Wall Street consensus forecasts of 1.8%.
As an added bonus so to speak, Goldman Sachs believes U.S. tariffs on Chinese goods have peaked.
“Although the equity market has started to price an acceleration in US economic growth, we believe the recent rotation has room to run,” writes Goldman Sachs strategist David Kostin.
Kostin recommends cyclical stocks in such a backdrop, such as Harley-Davidson and Kohl’s.