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Dow's rally likely to go on in 2011
By Stan Choe |
December 20, 2010, Monday
|
Print Edition
Print Edition
COULD the Dow set a record high next year?
That question would have seemed crazy early last year when fear and panic enveloped the stock market and the Dow Jones industrial average plunged to 6,547 on March 9. Many investors thought it would take a decade or longer to get back to the record of 14,165, set on October 9, 2007.
Now we could be on the verge. The Dow has soared 76 percent the past 21 months, and it would have to climb just 23 percent from last Thursday's close of 11,499 to set a record.
Many analysts don't expect a 23-percent gain in 2011, but they agree conditions are in place for the rally to continue.
Corporate bonds provide decent income. Meanwhile, corporate earnings keep rising, which makes stocks more appealing. Companies also are sitting on a record amount of cash, giving them leeway to pay bigger dividends, buy their own stock or buy competitors.
The economy could help, too. The Great Recession ended in June 2009. Expansions since World War II have lasted an average of nearly five years. The Dow doesn't always rise the year a recovery marks its second anniversary. But the last time it did so, in 2003, it jumped 25 percent. This expansion has been fitful so far. If it finally gains traction next year, stocks could do well.
The Dow has already risen 10 percent this year despite serious problems lingering in the economy, including a 9.8 percent jobless rate and a weak housing market.
That question would have seemed crazy early last year when fear and panic enveloped the stock market and the Dow Jones industrial average plunged to 6,547 on March 9. Many investors thought it would take a decade or longer to get back to the record of 14,165, set on October 9, 2007.
Now we could be on the verge. The Dow has soared 76 percent the past 21 months, and it would have to climb just 23 percent from last Thursday's close of 11,499 to set a record.
Many analysts don't expect a 23-percent gain in 2011, but they agree conditions are in place for the rally to continue.
Corporate bonds provide decent income. Meanwhile, corporate earnings keep rising, which makes stocks more appealing. Companies also are sitting on a record amount of cash, giving them leeway to pay bigger dividends, buy their own stock or buy competitors.
The economy could help, too. The Great Recession ended in June 2009. Expansions since World War II have lasted an average of nearly five years. The Dow doesn't always rise the year a recovery marks its second anniversary. But the last time it did so, in 2003, it jumped 25 percent. This expansion has been fitful so far. If it finally gains traction next year, stocks could do well.
The Dow has already risen 10 percent this year despite serious problems lingering in the economy, including a 9.8 percent jobless rate and a weak housing market.
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