{"id":2356,"date":"2024-07-29T08:00:09","date_gmt":"2024-07-29T08:00:09","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/?p=2356"},"modified":"2025-02-17T21:21:39","modified_gmt":"2025-02-17T21:21:39","slug":"dow-at-one-million","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/2024\/07\/29\/dow-at-one-million\/","title":{"rendered":"Dow at One Million?"},"content":{"rendered":"\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

When the Dow Jones Industrial Average (Dow) crossed a new high of 40,000 in May, it achieved a milestone that appeared implausible given recent popular sentiment. Just two years earlier, central banks were still on the path of aggressively hiking rates to curb inflation. Gloomy equity market forecasts abounded. Fast forward to today, and interest rates remain higher than anticipated. Many valuation models use interest rates to discount future cash flows: higher rates lower a company\u2019s future earnings and put downward pressure on stock prices. Alongside slower economic growth and high debt levels, the future has appeared cloudy through many lenses. Yet, markets can often be confounding.<\/p>

From an economic perspective, this period has been described by some as a liminal space, a transition between \u2018what was\u2019 and \u2018what\u2019s next\u2019 \u2014 a sort of \u201cin-between\u201d economy that\u2019s neither great nor terrible. It\u2019s a fair observation and perhaps explains why financial narratives seem varied and shifting. In December, many market observers believed we had inflation in check; yet the anticipated rate cuts did not largely materialize in the first half of the year \u2014 the Bank of Canada was the first G7 central bank to reduce rates in June. To preserve credibility, central banks have been moving cautiously after being criticized for their slow response to rising inflation; the consequences of the 1970s still loom large.<\/p>

Nobody wants a repeat of the 1970s, a time when inflation persisted for an entire decade at an average of 8 percent per year, alongside high unemployment, or stagflation.1<\/sup> It was only when then-Fed Chair Paul Volcker raised rates to a whopping 20 percent by 1981 that inflation would be conquered, but not without significant pain. Today, labour markets remain resilient amid easing inflation \u2014 an enviable outcome. Consider that inflation and unemployment traditionally exhibit an inverse correlation, and multiple studies suggest that higher unemployment depresses our well-being more than inflation, in some cases up to five times as much!2<\/sup><\/p>

Where are economies and the financial markets headed? Looking forward, it\u2019s worth recounting a prediction made by renowned investor Warren Buffett years ago: Expect the Dow to reach one million in 100 years.3<\/sup> At first glance, this may seem like quite the assertion considering the Dow hovered at a mere 100 points just 100 years ago4<\/sup>. However, looking deeper at the numbers, the Dow needed to compound at less than 4 percent annually to achieve Buffett\u2019s target at that time. Today, the S&P\/TSX would need an annual return of 4 percent to reach 1,000,000 by 2124.<\/p>

Yet, Buffett\u2019s intent wasn\u2019t to propose whether an arbitrary benchmark could be achieved. Rather, he meant to inspire confidence in future growth. History has shown that equities outperform most asset classes over time; not surprising given the general upward trajectory of corporate profits. This doesn\u2019t imply that there won\u2019t be challenges along the way \u2014 today, there are many. Yet, we continue to overcome these challenges because one thing hasn\u2019t changed: the human condition to advance and grow. As investors, we shouldn\u2019t lose sight of the growth yet to come, and we can all benefit should we choose to participate. We are here to provide wealth management strategies and support to navigate this liminal space \u2014 as we progress toward the one million mark.<\/p>

We hope you will find some time to relax and rejuvenate this summer. As always, we remain here to support any investment needs.<\/p>

1. https:\/\/www.bankofcanada.ca\/2019\/02\/price-check-inflation-in-canada\/;<\/a><\/span>
2. https:\/\/www.wsj.com\/articles\/inflation-and-unemployment-both-makeyou-miserable-but-maybe-not-equally-11668744274<\/a>;\u00a0<\/span>
3. https:\/\/www.cnbc.com\/2017\/09\/21\/dow-1-million-warren-buffett-says-it-can-appen.html<\/a>; <\/span>
4. http:\/\/www.fedprimerate.com\/dow-jones-industrial-average-history-djia.htm<\/a><\/span><\/pre>
\"\"<\/a><\/p>
The information contained herein has been provided for information purposes only. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information has been provided by J. Hirasawa & Associates and is drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual\u2019s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Wealth Inc. (WAPW) and the authors do not guarantee the accuracy or completeness of the information contained herein, nor does WAPW, nor the authors, assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. WAPW is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.<\/span><\/p>
Insurance products are provided through Wellington-Altus Insurance Inc.<\/span>
\u00a9 2024, Wellington-Altus Private Wealth Inc. ALL RIGHTS RESERVED. NO USE OR REPRODUCTION WITHOUT PERMISSION.<\/span>
www.wellington-altus.ca<\/span>
If you no longer wish to receive commercial electronic messages from Wellington-Altus Private Wealth Inc., please send an email to unsubscribe@wellington-altus.ca<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"
When the Dow Jones Industrial Average (Dow) crossed a new high of 40,000 in May, it achieved a milestone that appeared implausible given recent popular sentiment. Just two years earlier, central banks were still on the path of aggressively hiking rates to curb inflation. Gloomy equity market forecasts abounded.<\/p>\n","protected":false},"author":68,"featured_media":3017,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[40],"tags":[236,17,237,45,145],"class_list":["post-2356","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","tag-capital-gains","tag-financial-planning","tag-wealth-advisory","tag-wealth-management","tag-wealth-planning"],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/2356","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/users\/68"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/comments?post=2356"}],"version-history":[{"count":3,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/2356\/revisions"}],"predecessor-version":[{"id":2499,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/2356\/revisions\/2499"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/media\/3017"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/media?parent=2356"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/categories?post=2356"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/tags?post=2356"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}