"Roaring Twenties" and "Forrest Gump": why Yardeni Research expects the Dow to rise 43%

Ed Yardeni of Yardeni Research expects the blue-chip Dow Jones Industrial Average (DJIA) index could soon hit the 50,000-point mark, and by the end of the decade, 70,000.

On Wednesday, January 7, the Dow Jones Industrial Average index was just 2% away from the 50,000-point level: it hit a new all-time high before falling more than 450 points following US President Donald Trump's announcement that he would ban defense companies from paying dividends and stock buybacks. To reach Yardeni Research's second target of 70,000 points (its analyst expects the Dow Jones by the end of the decade) would require the index to rise another 43%, CNBC calculated.

Yardeni is confident that the DJIA will rise according to the "Charles Dow Theory" and the bullish trend in the US economy is far from over. The theory in question analyzes the relationship between the industrial index and the transportation index. According to the concept, the growth of the index of industrial companies should be accompanied by the growth of the transportation sector - Dow Jones Transportation Average (DJT) - and only then we can talk about a prolonged upturn in the economy. That's exactly what happened this week: the DJIA rose to a new record high on January 7, following the growth of the transportation index DJT, which also reached an all-time high the day before.

"We are pleased to see Dow Theory confirm our positive view," Yardeni wrote in a note to clients cited by CNBC. - Such mutual signals [in the past] have signaled economic growth to come."

Yardeni compared the U.S. economy to the movie "Forrest Gump," where the main character has been running nonstop for more than three years. "Since the end of the two-month recession caused by the lockdown in the spring of 2020, U.S. real GDP has been rising. So this run has been going on for 5 years, 8 months and 7 days," the analyst noted. - "In our Roaring 2020s scenario, we expect the economy to grow through the end of the decade without a recession."

Dow Jones Industrial Average index started 2026 with the best dynamics for the last eight years due to the growth of shares of financial and industrial sectors, including securities of such companies as Goldman Sachs and Caterpillar, writes MarketWatch. The index added 1.9% in the first four trading days of 2026, according to Dow Jones Market Data. By comparison, in 2018, the Dow rose 2.3% over the same period.

Since the end of 2025, investments have begun to flow from Big Tech into more cyclical and undervalued sectors of the economy, MarketWatch explains. This happened amid doubts about the ability of the largest technology companies to quickly monetize large-scale investments in the development of AI infrastructure. This rotation helped the Dow Jones index outperform the S&P 500 and Nasdaq in early January. However, on Wednesday, January 7, the trend reversed, with the Nasdaq performing better among the major indexes and the S&P 500 declining less than the Dow. Both the S&P 500 and Nasdaq also finished the first four sessions of 2026 higher, with the broad market index adding 1.1% (best start since 2023) and the technology sector adding 1.5% (best since 2019).

"We saw a strengthening position in cyclical sectors like financials and industrials at the end of 2025," Ross Mayfield, an investment strategist at Baird Private Wealth Management in Kentucky, told MarketWatch. - That trend has continued into the new year, supporting less tech-sector-dependent indexes like the Dow."

Keith Buchanan, a senior portfolio manager at Globalt Investments in Atlanta, attributed the Dow Jones' rise in early 2026 to the effect of pent-up demand, "We believe investors were locking in losses for tax optimization at the end of 2025. Now that this period is behind us, there is a pent-up buying of assets." According to him, optimism is also supported by expectations of accelerating economic growth in 2026. Also, the analyst reminds that investors are waiting for at least two rate cuts by the Federal Reserve in 2026 and the preservation of fiscal stimulus measures.

"All of these factors are shaping a market that doesn't look overheated and gives us no reason to get rid of stocks," Buchanan summarized.

This article was AI-translated and verified by a human editor