Question

Please provide me a detail 400-500 word response to this question. "The Dow Jones average currently stands at 23,735 points. Where do you project the Dow will stand in May 2021?"

Answer 1

There is a high level of uncertainty and fear among the people due to coronavirus concern which is leading to shutdown in several economies all across the globe. This kind of economic meltdown triggered by health crisis is one of its own kind, never seen before in the market history. Dow Jones was trading at all time high when the year is started and it made continuous highs in first two months but after there was an estimation that the virus is is highly lethal and contagious, economy were forced to be shut down.

Once the economy is shut down and the physical activity completely halted, the Dow Jones discounted it much earlier than announcement and it slump from 52 week high to 52 week low within span of two weeks which was led by extreme fear and pessimism, which lead to people selling their long term investment because there was too much fear and blood on over the street.

I personally expect that in the coming years the dow jones will recover but it will not be a Swift recovery because until and unless a vaccine is discovered. this covid-19 thing is gonna get more intense causing more loss to life and economy.

I think there would be a short term recovery first and this will not be sustainable in the long run because once the growth slowdown is started to factor into the results of different technologies and other stocks which are the part of u.s economy there would be a brutal bear market.

These were fuelled by lackluster approach of Federal Reserve in order to control the economy by providing undesirable interest rate cuts in order to the please the current government but these short term stimulus are not sustainable in the long run because the balance sheet of fed is also skyrocketing on the debt side.

so once government is done with providing all such stimulus and the Federal Reserve cannot cut further interest into the zone of negative interest rates, it is a highly likelihood situation that we will be heading heading towards sustainable bear market which will be sustainable for a few years and which will wipe out a lot of companies like one can see the airline sector which is completely on the verge of getting wiped out unless high amount of bailout package is provided by the Federal Reserve.

So in order to prevent such thing, this government and Federal Reserve need to act accordingly we should be e in the direction of long-term restructuring than short term pleasing.my prediction for Dow Jones that it would be in the range of 12000 to 15000 in years to come because it is highly overpriced on liquidity doses and high rate of Forward discounting of earnings.