The Dow Jones Industrial Average finally punched through the psychologically important 20,000 mark on Wednesday, launching a thousand tweets, including one from President Donald Trump.
So where does a market go after such a monumental milestone? Apparently, further north.
Andrew Adams, a market strategist at Raymond James, believes as far as the bull market is concerned, the current one still has many years left before it fizzles.
“Based on history, we could still have 7 to 8 more years left, and there’s a chance it could go longer since the 2007-2009 period was historically bad and may have extended the recovery phase,” said Adams.
As the chart above illustrates, there have been eight major structural markets—long-term primary trends—since 1896 and each has lasted an average of 14 years.
In fact, the strategist thinks the stock market of 2017 resembles the golden era following World War II and the boom years of President Ronald Reagan’s presidency.
Apart from history, the market today also has favorable economic conditions at its back, including a relatively low interest-rate environment, stable inflation, and what some describe as a recovery in corporate earnings.
“Market sentiment remains well-below bubble levels, the primary economic indicators remain trending up, employment is strong, [and] wages are picking up – basically everything supporting the fact that we are nowhere near a recession or headed for an end to this bull market,” Adams said.
The large-cap S&P 500 index is also well positioned for further upside as the index’s recent rally is more broad-based versus being fueled by a select mega caps. That’s a dynamic market participants refer to as market breadth, where a diverse base of stocks help lift overall index gains rather than a few.
Still, as the Dow DJIA, +0.70% secures a foothold above 20,000, there will be the usual dangers of navigating into uncharted territory.
“Trump and his policies are certainly a risk,” said Adams, addressing widespread fears that the untested president may have promised more than he can deliver. And there is a real chance that investors will be disappointed at some point when Trump is not able to execute sizable enough infrastructure spending or cut taxes as much as expected. “All these prospective policies take longer than the market is willing to wait,” he said.
Meanwhile, Adams urged investors to remain “cautiously optimistic” and patient. “Keep on riding the trend,” he said, adding that dips should be viewed as opportunities to buy.
All major indexes are on track to close at records with the Dow surging by triple digits to 20,069 while the S&P 500 SPX, +0.70% and Nasdaq Composite were on pace to notch a second straight day of closing at an all-time high.