Ron Baron, the CEO of Baron Capital, recently predicted that the Dow Jones Industrial Average (DJIA) would hit 900,000 by 2073. This might seem outrageous as the index is trading just above 33,000 at the moment, but Mr. Baron estimates that stocks have grown 34 times their value since 1970. There is no reason why it shouldn’t continue.
He also expects GDP growth to surpass 7% in the next 50 years. Part of this growth will be due to a 4%–5% inflation rate, which is in line with the historical average. Of course, Baron's prediction also underscores the double-edged sword of inflation. While it may drive stock gains through higher corporate earnings, it will also destroy purchasing power.
Baron's assertion that "everything is going to be twice as expensive in 14, 15 years" acknowledges this reality, reminding investors that even as they reap rewards from market growth, they must brace for an elevated cost of living.
Buffett Calls for Dow 1 Million
Six years ago, Warren Buffett, the chairman of Berkshire Hathaway (NYSE: BRK.A), also made a seemingly bold prediction. At a Forbes magazine event in 2017, Buffett stated that he envisioned the DJIA crossing the 1 million mark in 100 years, a leap from its then-state of 22,397.
This might seem outlandish, but when you consider that the DJIA was at a mere 81 a century prior, barring total war, plague, or societal collapse, it is feasible.
Buffett's belief in the inherent strength of the U.S. economy is heartening. However, some view his projection as overly conservative. Buffett's billionaire compatriot Mario Gabelli couldn't resist a jab at Buffett's prediction; he joked about Buffett's conservative estimates, suggesting they bordered on bearishness. Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
Historic Returns of the Dow
The Dow Jones Industrial Average, one of the oldest and most watched stock indexes in the world, was created by Charles Dow in 1896. Initially consisting of just 12 industrial companies, it now consists of 30 large publicly traded companies across various sectors.
The DJIA has provided an average annual return of approximately 5.4% since its creation. However, this figure does not account for dividends. If dividends are included and reinvested, the average annual return is closer to 7.1%.
A $450,000 investment returning an annual 7.1% would get you $13,889,482 in 50 years, which may or may not be the price of a median-priced house.
Of course, here at Energy and Capital, our goal is to do much better than 7.1% annual growth. In my Launchpad Trader advisory service (and during a very difficult year to boot), our closed portfolio managed to return 19%. In 2022, my portfolio returned a whopping 79%, and in 2021, it returned 37%. So if you'd like to do better than 2% above inflation, I suggest you join us and start making money today.
All the best,
Christian DeHaemer Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
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