Investing.com — According to a recent report by Yardeni Research, both the S&P 500 and Dow Jones Industrial Average (DJIA) are poised for significant growth by the end of the decade.
Yardeni analysts predict the DJIA could reach 60,000, while they said the S&P 500 could surpass 8,000 by 2030.
The key driver behind the S&P 500’s growth, according to Yardeni, is earnings per share (EPS), which has been increasing at a steady rate of 6-7% annually since the 1950s.
In Yardeni’s “Roaring 2020s” scenario, S&P 500 EPS could double to $400 by the end of the decade, with a price-to-earnings (P/E) ratio of 20, pushing the index past the 8,000 mark.
“The S&P 500 continues to rise along with its reported earnings per share,” Yardeni notes, adding that the index’s trailing P/E ratio, while relatively high, has been higher in the past and tends to dip during recessions, only to rebound afterward.
Despite current geopolitical tensions, Yardeni remains optimistic.
Historically, geopolitical crises have often presented buying opportunities, although they note the stock market struggled during the “crises-prone 1970s.”
Yardeni also advises investors not to let political views influence investment decisions, stating that the market tends to rise regardless of who occupies the White House.
“The stock market tends to rise no matter who is in the White House and how much they’ve inflated the federal government’s debt,” said the firm.
Looking back, the firm says the S&P 500 has averaged a 7.3% annual increase since 1928, with dividends further boosting returns.
Yardeni highlights that the market tends to have more up years than down years, with the worst months historically being February, May, and September.
“The length of bull markets varies. They tend to end before recessions and to resume when an economic recovery seems likely,” concludes the firm.
