The Dow Jones Industrial Average (DJIA) is a preferred barometer for the U.S. stock market's performance. It is certainly the most widely recognized stock index in the world and is indeed the oldest. When it was instituted in 1896 it listed only 12 industrial stocks. Today, there are 30 blue chip companies listed on the DJIA and they represent a wide range of industries from healthcare to energy to entertainment. Each stock trades on either the New York Stock Exchange or the Nasdaq.
The expression, ‘When the U.S. sneezes, the rest of the world catches a cold,' is a true glimpse at the influence of the Dow on what occurs in markets throughout the world and that is exactly why investors from all parts of the globe look at this index with a very keen eye.
When analysts predict the direction that the Dow will take in 2015, ears perk up and investors take notice. Two well-known strategists told CNBC on Friday that the coming year will be good for the market and in fact, one of these economists predicted that the Dow Jones Industrial Average will go as high as 21,500 in 2015.
Market Resilience
Gene Peroni, portfolio manager at Advisors Asset Management, explained this steep ascent as a result of the resilience of the market in the face of challenging headline risk. Peroni noted, “We're moving into the later stages of this cycle and as we've seen in previous cycles, that's when you tend to get the more urgent buying, when you tend to get more of a willingness to accept more risk for more reward. I think we're moving toward that point.”
Peroni also sees many opportunities in small- and mid-cap stocks, pointing out that the Russell 2000 has significantly outperformed the S&P 500 and the Russell 3000 since Oct. 15.
“I think that's a trend that is going to continue, maybe even widen as we go toward the latter stages of this cycle,” he said.
Not all strategists agree with the huge upward movement expected in 2015. Some expect the year to be good, but not so great for most global stock markets. The U.S. stock market however, unlike others around the world, is expected to enjoy an environment of consistent growth against a setting of tempered inflation, low energy prices and low interest rates.
