Will the Dow Jones Continue to Rise in 2020?

By Dale Gillham | Published 14 October 2019

All markets move in cycles both up and down with these moves creating the bull or bear markets we hear about in the media. So is the rise in the US stock markets sustainable and will the Dow Jones Index continue to rise in 2020?

Based on historical price information, we know that the average bull market is around 9 years, while the average bear market is just under 18 months in length.

We also know that since the low in 1932, the Dow Jones has experienced a 50 percent fall in price from its all-time high on two occasions, a 40 percent fall in price on three occasions, as well as a 30 percent fall in price on three occasions.

We also know that roughly every 4 years the Dow Jones falls around 15 to 20 percent and roughly every 20 years it falls 30 percent or more. We also know that the shortest period of time between a fall in price of 40 percent or more is 154 months or 12.8 years, which was between 1974 and October 1987.

So how does this information support you in understanding the future direction of the Dow Jones Index?

Is has been 10 years or 126 months since the March 2008 low on the Dow Jones Index, and during this time the Dow has fallen around 20 percent on three occasions, with the most recent occurring in December 2018.

If I add 12.8 years (remembering this is the shortest period of time between a fall in price of 40 percent or more) onto March 2008 low, then the next major low on the Dow Jones Index is expected around January 2022.

Given this, we can expect the Dow Jones to rise for around another 12 months before starting to fall into a low.

In other news on the market, last Friday Facebook’s ambitious efforts to establish a global digital currency called Libra suffered significant setbacks.

Major payment companies including Mastercard and Visa announced they would back away from supporting the currency, as did EBay Inc, Stripe Inc and Latin American payments company Mercado Pago.

They join PayPal Holdings Inc which exited the group a week ago, as global regulators continue to air concerns about the project.

The latest exodus leaves the Libra Association without any remaining major payments companies as members, meaning it can no longer count on a global player to help consumers turn their currency into Libra and facilitate transactions.

UR reporting season also starts again this week with Citigroup, JP Morgan, Wells Fargo, Goldman Sachs and Johnson and Johnson due to report on Tuesday, while IBM, Bank of America and Netflix will report on Wednesday.

Thursday will see Morgan Stanley and Philip Morris report, while Coca-Cola, Amex and Schlumberger (which is one I am keeping my eye on) will report on Friday.

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