Dow 40,000

Dow 40,000 is the new book by David Elias of Elias Asset Management. Through detailed analysis and research, David Elias has established a target of 40,000 for the Dow Jones Industrial Average by the year 2016. This projection translates into an annual average growth rate for stocks of somewhere near 11%, which is close to what the markets have returned over the last 75 years, but it's important to note it is less than the return of the last 15 years. Support for this theory is drawn from the continued enhancement of corporate productivity, long-term economic and political fundamentals, historic market growth rates, the favorable impacts of both a balanced budget and tax reductions, the likely privatization of some portion of the Social Security system and the increasingly important role to be played by 76 million baby boomers preparing for retirement.

The future does indeed seem promising, but the path to 40,000 will not be a straight rise upward. We will have to endure the temporary down periods that will test our resolve in order to enjoy the long-term gains. Periods such as July 1996 and March 1997 and most recent October 1997 have sent the major equity averages down by more than 5% each time. These corrections have weeded out the overpricing of certain stocks and paved the way for the market to continue its ascent. As painful as these periods may seem, they are healthy occurrences for the markets.

David explores all these aspects and more in Dow 40,000.