Dow 150,000!!! According to This One Chart...

The Reformed Broker, Josh Brown, this morning tweeted out a guest blog that puts an astronomical price target on the Dow Jones Industrial Average that implies that there is about 1000 percent upside in blue chip stocks. By the year 2043...

Techincal Set-Up

According to the long-term logarithmic chart of the Dow, the recent sideways market from the peaks of the tech bubble, known as a secular bear market, is setting up to see unprecedented gains.

Michael Gouvalaris, an equities trader and portfolio manager, posted on the blog the chart that should have investors giddy. On the logarithmic chart, a chart scaled to make percent changes look the same (instead of a chart in dollar value increments), the next leg is set to resemble the bull market periods of 1932-1966 and 1974-2008.

Extrapolating out the long term trend of the Dow and using these moves as indicators of potential prices, the Dow could feasibly reach 150,000 by 2043. The nearly 1000 percent return is actually conservative considering that the average return of the two prior periods is about 2,377.5 percent. Although, measured from the 2008 low, the move is in line with historical moves.

On an annualized basis, the stock market would only need to return about 5.88 percent per year. The long-term historical return of stocks is between 6 and 8 percent, so this is actually a conservative forecast given historical trends and assuming full dividend reinvestment. If stocks were to average 8 percent returns per year with full reinvestment, theoretically, the Dow could reach an unheard of 168,100 level. this is only about 1002.32 percent total return. Not too shabby...