Dow 12,500

Brian Wesbury is characteristically upbeat on prospects for the Dow:

Since the third quarter of 2001, after-tax corporate profits have surged 80%, interest rates have fallen, and yet the S&P 500 is up less than 8%. During this same time period the P-E ratio, based on trailing earnings, has fallen from roughly 37 to 18. A capitalized profits model, which discounts profits at current interest rates, shows the market more undervalued than at any time in modern history. The fundamentals suggest that today is a good time to own stocks.

...the past five years will prove to be just another pothole in a continued bull market. While 11,000 gives us something to cheer about, a 12,500 Dow this year is imminently (and eminently) doable, as is another decade of continued prosperity.

posted on 12 January 2006 by skirchner in Economics

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