The most outrageous prediction is here? Analysts claim that the S&P 500 will rise to 8000 points
Top Wall Street analyst Ed Yardeni predicts that by 2030, the Dow Jones Industrial Average is expected to reach 60,000 points, while the S&P 500 index may rise to 8,000 points, representing an increase of around 50% from last Friday's closing prices
The Dow Jones Industrial Average reaching 40,000 points last week was an important milestone for the US stock market. However, a top Wall Street forecaster predicts that due to improving earnings, there will be even greater gains in the future for US stocks.
Ed Yardeni, President and Chief Investment Strategist of Yardeni Research, told clients in a recent report that by 2030, the Dow Jones is expected to reach 60,000 points, and the S&P 500 index could rise to 8,000 points, representing an increase of around 50% from last Friday's closing prices.
For the Dow Jones and S&P 500 indices, this implies annual compound growth rates of 7% and 7.1%, respectively. So far this year, the two indices have risen by 6% and 12%, respectively.
"This target can be achieved with a forward price-to-earnings ratio of 20 times and forward earnings per share of $400, a 60% increase from the expected $250 per share this year," Yardeni said. "We believe this is possible in our 'Roaring 2020s' scenario."
Yardeni's 'Roaring 2020s' scenario assumes that earnings per share for S&P 500 companies will grow by at least 8.8% annually, which is the historical average growth rate since 1936. Earnings per share expansion could accelerate towards the end of the 1940s.
"If productivity growth accelerates faster than the average level of 2.0% since 1951, this scenario could occur, as we anticipate in our 'Roaring 2020s' scenario," Yardeni stated.
"If productivity growth exceeds expectations, real GDP growth will also exceed expectations. It will lower unit labor costs, which is potential inflation. Wage growth will then outpace price growth, boosting profit margins," he said.
Yardeni also mentioned that other industry analysts are becoming increasingly optimistic, with a consensus expectation that corporate profit margins will be 12.6% this year, increasing to 13.6% and 14.4% in the next two years.
In December last year, Yardeni predicted that the S&P 500 index would reach 6,000 points within two years. It is worth noting that he correctly predicted the rebound of the index last year, setting the S&P 500 index at 5,400 points for 2024, one of the highest target prices on Wall Street.