Dow Jones forecast: Brighter days ahead?

By Capital.com news16:39 (UTC), 10 February 2023 Updated

Dow Jones forecast: After a turbulent 2022, are there brighter days ahead? Photo: Venturelli Luca / Shutterstock.com

The Dow Jones Industrial Average (US30) has had a fairly positive few months after falling to 50-week low of 28,725.51 last September, amid a challenging economic environment.

The closely-watched index has since rebounded 17.6% to trade at 33,793.59 as of 10 February 2023.

So, what will happen next? Will the US30 Index continue its current trend or will the losses of 2022 be repeated this year?

In this Dow Jones forecast, we look at the recent performance, see how it compares with other US indices, and reveal what analysts predict for the coming months.

What is the Dow Jones Index?

The Dow Jones Industrial Average (DJIA), also known as the Dow, is a stock exchange that tracks 30 of the most prominent, actively traded companies in the US.

The index is one of the oldest and most popular in the world, dating back to the late 1800s. It was created and named after Charles Dow, an American journalist who also co-founded The Wall Street Journal, in order to provide investors with information about stock activity.

The Dow originally consisted of 12 companies, which were some of the biggest stocks of the 1890s, and mainly manufacturers of raw material. These included American Cotton Oil, American Sugar, American Tobacco.

In 1928, it expanded to 30 companies and today contains some of the most prominent companies, such as tech giant Apple (AAPL) and beverage corporation Coca-Cola (KO).

How has the US30 index performed?

The index spent much of 2022 below 34,000 points as multiple interest rate hikes by the US Federal Reserve (Fed) raised concerns about a possible recession in the US.

Although it started the year well at 36,321.59, it hit a downtrend that saw it fall to 32,272.64 on 24 February.

Though the US30 rebounded in the spring, trading at a high of 35,372.26 on 28 March, by June it had lost all its gains as it fell below the 30,000 mark for the first time that year.

It would trend upwards once again toward late summer, reaching 34,281.36 on 16 August, but this was followed by a downward slide that saw the index reach its lowest point of the year in September.

However, the end of the year brought a more positive turn as the Dow closed at 33,147.25, having hiked 15% from its 2022 low, but fallen 8% during the year.

As of 10 February 2023, the index was up a modest 2%, having so far avoided much of the volatility it witnessed the previous year.

Dow Jones (US30) Index performance 2017-2022

How other US indices have performed?

Of course, the Dow wasn’t alone when it came to being affected by economic issues. In fact, it hel up better than other US markets.

For example, the S&P 500 (US500), Wall Street’s benchmark index dropped by almost 20%, in 2022.

The tech-heavy Nasdaq Composite (US100), meanwhile, plummeted by 33% last year.

However, major US stock indices show signs of optimism so far this year, with the S&P 500 up almost 7% year-to-date (YTD), and the Nasdaq 100 up close to 13%.

In an analysis from 5 January, Goldman Sachs’ chief US economist David Mericle believed it was possible for the country to avoid a recession in 2023.

“Our probability of a recession over the next 12 months stands at 35%.

“Part of our disagreement with consensus arises from our more optimistic view on whether a recession is necessary to tame inflation. We think that a continued period of below-potential growth can gradually rebalance supply and demand in the labor market and dampen wage and price pressures with a much more limited increase in the unemployment rate than historical relationships would suggest.”

Dow Jones (US30) Index vs S&P 500 (US500) vs NASDAQ Composite (IXIC)

Dow Jones forecast: Analysts’ comments

Daniel Hathorn, senior market analyst at Capital.com, believed achieve a soft landing would be the key theme behind the performance of US stock indices in 2023.

“Soft landing is actually the view that the Federal Reserve has it right. The Federal Reserve believes that interest rates can be kept elevated througout the year while inflation comes down and unemployment picks up a little bit but remains within a manageable area. That is the key feeling that we got from the central bank in their last meeting.”

However, she believed this was in contrasted to the markets expectations, which seemed to be for a hard landing scenario. “They’re expecting data to worsen from here on out, and for the Fed to have no other option but to start cutting rates in 2023.”

Dow Jones predictions: 2023 and beyond

What is the Dow Jones forecast for 2023?

As of 10 February, the Economy Forecast Agency predicted the index could trade at 33,634 points by March 2023 — the maximum value of the index was expected to be 35,652, and the potential minimum was outlined at 31,616.

The Dow Jones prediction for February 2024 was 33,232 points, according to the EFA. While the maximum value could be 35,226 points, the minimum was expected to be 31,238 points. Meanwhile, it saw the index potentially closing at 34,900 in February 2025.

According to Trading Economics, the US30 Index was expected to move down to trade at 32,813.24 points by the end of the first quarter of 2023. Looking forward, the forecasting service suggested the index could drop to 29,688.65 in 12 months.

Wallet Investor believed that the Dow could be a “not so good long-term (1-year) investment”, expecting the index to plunge to 28,738.84 in a year. The website’s forecast, however, had not been updated in several weeks due to “missing data or revoked stock”.

Its Dow Jones forecast 2025 suggested the US30 could rebound and trade at 29,351.91 by the end of February. None of the forecasting tools provided a Dow Jones forecast for 2030.

FAQs

Is Dow Jones a good investment?

A lot will depend on the economic environment. The current expectation seems to be that inflation could remain high over the coming months, necessitating further interest rate hikes from the Federal Reserve.

Will Dow Jones go up?

No one knows for sure. Economists haven’t ruled out a bounce for equities and the US30 index contains some household names that are often in demand from investors. However, analysts' predictions can go wrong. You can always conduct your own research before making any trading decision.

Should I invest in Dow Jones?

Companies on the Dow Jones index are some of the largest, most prominent US stocks. However, the index has been in a downtrend lately and lost 15.88% year-to-date by the close on 30 June 2022 amid recession fears and other macroeconomic headwinds. You need to carry out your own research before trading.