Dow 23,000 fast approaches

Wall Street has plenty of room to grow, some investors say

If Wall Street bulls are right, traders on the floor of the New York Stock Exchange will soon be wearing “Dow 23,000” rally caps.

Dow 23,000 — which is just 128 points away — would be more than just another impressive number. It would be a fresh reminder that U.S. stocks are at yet another all-time high.

And that approaching milestone poses an age-old dilemma for investors: Is getting into the market at lofty levels a good or bad idea?

So far this year, people who played it safe and viewed any of the Dow Jones industrial average’s 48 record highs as a market top probably regret their decision. They have missed out on big gains.

As of Friday, the Dow has appreciated 15.7 percent in 2017 to 22,872 — blowing past 20,000, 21,000 and 22,000 along the way. An investor who put $10,000 in a bank savings account at the start of the year instead of investing in the Dow has missed out on a paper gain of $1,570.

And now that the 121-yearold stock index is within striking distance of “23K,” it doesn’t mean it can’t go higher.

The bull call

Some Wall Street pros say hold off on buying a souvenir “Dow 23,000” cap because it likely will be out of style soon, replaced by “Dow 24,000” or “Dow 25,000” hats.

Dow 24,000 might not be far behind, as there’s nothing on the horizon that screams mar-

ket top or rally killer, bulls say. There’s no irrational exuberance. No runaway inflation. No hint of a coming interest rate spike. And no signs of recession.

And that means — barring some unforeseen shock like a nuclear war or some other outof-the-blue event that causes a mass exodus from stocks — there are low odds of a stock market meltdown anytime soon.

“Dow 23,000 could spark a market meltup,” said Ed Yardeni, chief investment strategist at Yardeni Research, referring to a buying frenzy that leads to a steep and rapid rise in stock prices that no one saw coming.

The melt-up could drive investors now on the sidelines to pile back into the stock market at the same time.

“The pain of missing out becomes more intense, as does the pressure to just jump in,” Yardeni said.

The Dow, Yarendi predicted, could climb to 25,000 by the middle of next year.

Corporate profit growth has been good, he said, with numbers posted in the first half of the year the best since 2011. The market, while pricey based on a historical price-to-earnings basis, isn’t as rich as it appears when low interest rates and tepid inflation are factored in. And major anxieties like Greece getting “booted out of the eurozone” have faded amid an economic rebound in Europe and most other parts of the world.

“We have spent the past few years coming up with things to worry about that have all turned out to be nonevents,” Yardeni said. “Now, the market doesn’t seem to fear turmoil.”

Not-so-bullish call

But not everyone is calling for the Dow to run away to the upside.

“It would be hard for me to get wildly bullish at Dow 23K,” said Bill Hornbarger, chief investment officer at St. Louis-based moneymanagement firm Moneta Group.

This is a time for investor caution, not complacency, he said.

Just because stocks overall have been in a relative state of calm and haven’t suffered a drop of 5 percent or more since June 2016, when markets got spooked by the Brexit vote, doesn’t mean investors should rule out a sell-off, especially since the market is expensive relative to history.

“This is when investors have to be on guard,” Hornbarger said.

Others disagree. If the latest 1,000-point milestone occurs, it won’t be a sign of a Dow careening toward a major market wreck, said Jim Paulsen, chief investment strategist at The Leuthold Group, a Minneapolis-based investment firm.

Paulsen is upbeat in large part because the run to new highs has included a wide swath of stocks from many different industry groups, which is a sign of strength.

“It’s not just tech; it’s not just Apple,” he said.