Dow Jones Analysis and Price Forecast for today, 2022 and beyond: testing the lows?

By: Cristian Cochintu

15:42, 04 November 2022

predicții preț Dow Jones

Q4 2022 has been very good for Dow Jones, which has gained 25% in a challenging economic environment. The 2023 Dow Jones price predictions are still bearish.

The Dow Jones index (US 30) finished 2022 on a strong note as the market bet on an end-to-peak US Federal Reserve hawkishness. 

The Dow index rebounded 25% from a near two-year low below 29,000 points to close 2022 at 33,147 points. DJI has fallen 8.9% in the recent year, the biggest since the 2008 financial crisis, largely driven by a rout in growth shares as concerns over Fed's rapid interest rate hikes boost U.S. Treasury yields. 

Will the Dow extend this rebound into 2023? In this Dow Jones analysis, look at its recent price performance and review Dow Jones forecasts and price predictions for 2023 and beyond from analysts.  

  • Dow Jones price prediction today: Even after bouncing off their October lows, stocks were down big in 2022 – and market watchers expect more of the same in 2023, at least at the start. 
  • Dow Jones price prediction 2023: In the first half of 2023, the Dow Jones index is expected to re-test the lows of 2022 at 30.000, but a pivot from the Fed could drive an asset recovery later in the year, pushing the Dow back to around 36,000 by year-end. 
  • Dow Jones price prediction 2024, 2025, 2030: In 2030, projections and trends show that the Dow would reach 50,000, according to a mathematical forecasted model successfully applied in the past. 

With CAPEX.com you can trade Dow Jones through CFDs if you want to speculate on price movements or invest in Dow stocks or Dow Jones ETFs.  

 

Dow Jones Analysis and Outlook 2023 

For Dow Jones, stock markets, and more broadly risky asset classes in 2023, there is both good and bad news.  

  • The good news is that central banks will probably be compelled to change course and indicate interest rate reductions sometime in 2023. This should lead to a sustained rebound of asset prices and ultimately the economy by the end of 2023.  
  • The bad news is that we will need to see a combination of increasing economic deterioration, rising unemployment, market volatility, declining levels of risky assets, and falling inflation in order for that turn to occur.  

Soon, each of these is likely to contribute to or coincide with downside risk. 

What is the Forecast for Global Economic Growth in 2023? 

2022 was a shocking year. The growth results for 2022 were far more stable than the historically volatile years of 2020 and 2021, which saw the biggest global recession on record followed by the strongest recovery. But 2022 has been exceptionally tumultuous, with the global economy struck by many unfavorable shocks — from supply and demand concerns spilling into labor markets and a third big wave of COVID-19 to Russia’s invasion of Ukraine.  

As 2023 approaches, the drag of tighter monetary policy is intensifying, yet central banks continue to advance. 28 of the 31 leading economies have increased their rates. There will probably be more. According to its current projections, the Federal Reserve (Fed) will have raised rates by a total of about 500 basis points (bp) by the first quarter of 2023.  

The Fed is anticipated to suspend rate hikes by the end of the first quarter of 2023, followed by other significant central banks. This central bank activity is casting some doubt on the forecast for next year. 

What is the Forecast for GDP in 2023? 

The rapid increase in borrowing costs has already had a negative impact on housing activity, and it is expected to have a negative impact on the profit margins of American corporations. Additionally, there are more and more indications that general credit conditions are tightening. The tremors coming from low-income commodity importers in emerging markets (EM), U.K. pension funds, and the U.S. crypto market are not unrelated; they indicate that rapidly tightening financial conditions are creating stress that may have negative spillover effects that could endanger macroeconomic stability. 

The winter is expected to escalate China's COVID issues and Europe's natural gas crisis worse, further depressing the forecast for global growth. However, market observers do not believe that the world economy will soon be in danger of entering a recession in the first quarter of 2023. The impact of supply chain and commodity price shocks is diminishing, cushioning the pressure caused by the financial conditions. 

After approaching 10% in the second half of 2022, global consumer price index (CPI) inflation is projected to decrease to 3.5% in the early months of 2023. 

Situations call for considering a variety of possibilities. A U.S. recession is the main event in all of the offered scenarios. However, experts disagree on the exact date of this break, the direction of Fed policy, and the effects on the rest of the world. 

A 1.6% increase in global GDP growth is anticipated for 2023. In 2023, growth is anticipated for Developed Markets at 0.8%, for the United States at 1%, for the Euro Area at 0.2%, for China's economy to expand by 4.0%, and for Emerging Markets at 2.9%. 

What is the Forecast for Dow Jones and Stock Markets in 2023? 

The S&P 500 price-to-earnings (P/E) ratio was derated by investors in response to a year of macroeconomic and geopolitical shocks by as much as seven times, while other speculative growth areas had a 70–80% drop from highs. 

Although fundamentals have held up through these shocks, the favorable growth environment of this year is not anticipated to last beyond 2023. As financial conditions tighten further and monetary policy tightens even further, fundamentals are expected to deteriorate. The labor market is predicted to decrease and the unemployment rate to increase to about 5% as the economy is also predicted to undergo a moderate recession. 

According to experts, consumers who had a cushion of savings from the lockdown have mostly used up their post-COVID surplus cash and are now experiencing a broader negative wealth effect from all assets at once, including housing, bonds, stocks, alternative/private investments, and cryptocurrency. 

In 2023, the metaphorical snowball should continue to gather speed as consumers and corporations slash capital expenditures and discretionary spending more significantly. 

Analysts anticipate that the Dow Jones will test the 2022 lows again in the first half of 2023 as the Fed overtightens into worse fundamentals. The Dow Jones is forecasted to test the highs by the end of 2023 as a result of this sell-off, disinflation, growing unemployment, and deteriorating business mood, which should be sufficient for the Fed to start signaling a change of course.    

Dow Jones forecast – what charts are saying?  

A study by the Bank of America revealed that the average peak-to-trough in a bear market was 37%. So far, the Dow was down about 20%, so that would suggest, if we're going to carve out a 'normal' bear market, there's much further to go for the Dow. The average length [of a bear market] was also outlined at 89 days. The decline started in January 2022 and lasted for 3 quarters. so a Dow Jones forecast would suggest that there could be more pain to come from the price point of view and not from time. The presumption is that a lot of the time bear markets, shorter ones, last nine months. Longer ones will keep on going for about a year and a half., so a Dow Jones forecast would suggest that there could be more pain to come. 

Dow Jones analysis and technical price forecast

Whilst the Dow Jones was the index that rallied the least on the back of the pandemic recovery out of the US major stock indices, it has also been the one that has held up best in 2022. In fact, contrary to the S&P 500 and Nasdaq, the Dow has managed to break above its 2022 trend line. It is also holding above its 200-day Simple Moving Average (32,438) so this alone suggests there is a better chance of follow-through in the rally than in the USA 500 and US Tech 100.  

In fact, as the USA 30 price chart shows, the trend line has started offering some support at 32,490 which has allowed buyers to start undoing the post-FOMC selloff. Nonetheless, there are still challenges ahead for the Dow so it is not a clear path higher in Q1, but there may be room for a bounce back towards 34,000 in the short term.  

On the other hand, high inflation and a hawkish Fed remain as headwinds heading into 2023 so the descending trend line will be a key test of the strength of sellers. If we see a break below it and the 200-day SMA simultaneously then the other moving averages will likely be breached. 

A technical Dow Jones forecast aligned with the fundamental Dow Jones forecast from experts indicates a higher low at around 30,000 points within the next months, followed by a new leg up towards the actual highs.   

Long-term moving averages tend to act as proxies for broader trends. Prices tend to mean revert to them from extreme overbought or oversold conditions, especially when some of the drivers of overextension change/reverse. Going by the distance between the 200-month moving average (MMA) and the index, the dot-com crash, the Great Financial Crisis (GFC), and Covid-19 selloffs were all preceded by extreme overbought conditions. 

This doesn’t imply that the index must revert towards the 200-MMA – it could well go sideways, while the 200-MMA catches up. In a way, the MACD indicator can serve as a guide to how stretched the trend was at the start of the year, although quantifying the extent of optimism/ pessimism can be tricky given it is an unbounded indicator (see chart above). 

Visit CAPEX Academy for more free courses on technical analysis that could help you forecast Dow Jones and make more informed Dow Jones price predictions for 2022 and beyond.

Factors Affecting Dow Jones Forecast For the Next 3-6 Months 

Stocks are directly influenced by the amount of liquidity in the economy, the more cash there is to spend the more stock prices rise. Central banks are the gatekeepers to this liquidity and so that is why traders pay so much attention to their meetings and decisions, and 2023 is unlikely to be any different.  

Keep watching interest rates – and look for signs of a recession 

A key area for investors to watch in 2023 is interest rates, as the Federal Reserve has indicated that it may slow or stop rate hikes, likely in the first few months – a marked shift in policy. 

In order to battle inflation that reached multi-decade highs, rates were raised at an unprecedented rate in 2022. The Fed raised rates seven times in a row, including four consecutive sessions where it raised rates by 75 basis points, from 0 to 0.25 percent at the beginning of 2022 to 4.25 to 4.5 percent at the end of the year. Additionally, by quickly selling off its bond portfolio, the Fed has significantly depleted the financial system's liquidity. 

These actions have caused the stock and bond markets to decline, so investors seeking for a market turn and accurate Dow Jones price predictions need to pay close attention to the Fed.  

What Investors Should Do In The Bear Market 

So with all the risks hanging over the stock market forecast for the next six months, what should investors do? Cash is often seen as dead money. At the same time, protecting one's capital by shielding it from vicious drawdowns is the hallmark of the exceptional stock market investor. 

While it is easy to switch off and focus on other things when stocks are struggling, it can actually be the best time to turn yourself into a better investor. 

When it's hard to make progress in the market, this is a great time to study what you did in the prior bear market, according to experts. 

Visit CAPEX Academy and learn how to trade during market downturns and falling prices.

Dow Jones prediction 2023 and beyond from experts 

As for Dow Jones price predictions, Trading Economics expected the US30 index to trade at 33,170 points by the end of Q1 2023, 32,000 points by the end of Q2 2023, and estimated the index could drop to below 30,000 points by the end of 2023, based on its global macro models and analysts expectations.  

Below is the algorithm-based Dow Jones price prediction for the next 12 months. A sell-off should start at this point and continue during the month of November, followed by a steady downward trend in the next 9 months of 2023. 


source: tradingeconomics.com

Algorithm-based forecasting service Wallet Investor was bullish on the Dow Jones index, saying DJIA is “a good long-term (1-year) investment”. It estimated the index to climb to 41,167.60 points in Mid-2024 and 45,801.33 points in Mid-2025.

However, the agency downgraded its Dow Jones price predictions lately and forecasted Dow Jones will close in 2023 at 28,420 points. 

The updated Dow Jones price prediction for 2024 is $29091. 

Long Forecast expects Dow Jones to trade at 35,400 points by the end of Q1 2023, at 37,000 by the end of Q2 2023. and around 35,000 points by the end of 2023. In two years from now, the agency forecast Dow Jones to trade at 38,600 points. The agency is forecasting Dow Jones to reach an all-time high at 39,000 in May 2023, followed by an 18-month minor decline to the actual levels.    

The forecasting services did not provide a 10-year Dow Jones price prediction. 

Dow Jones Price Prediction 2025-2030 (USA30 Forecast)  

While some advisors are optimistic that the bull market will continue, others are preparing investors for what they see as its imminent end. As the current bull is now the second-longest ever, these advisors say that the odds are overwhelming and that it will soon be going bearish. 

However, Dave S. Gilreath, partner and founder of Sheaff Brock Investment Advisors, is confident and sees a bright economic and other market future ahead. He believes the current bull is likely to continue galloping for years to come, pushing the Dow Jones Industrial Average above 40,000 by 2025. 

Companies typically grow their earnings over time. Assuming an average growth of net earnings is 7% per year, in a five-year period a company’s cumulative profits will be about $40 for every $100 invested.  

Reasoning onward, using a mathematical forecasting model, analysts revealed more interesting results. The year 2020 marks when this math equation took us above 30,000. In 2030, projections and trends show that the Dow would reach 50,000, says Brian Evans - the owner of Madrona Funds, LLC, and Bauer Evans CPAs, who also serves as the firm's chief investment officer, lead planner, and senior portfolio manager.  

*It is worth keeping in mind that both analysts and online forecasting sites can and do get their predictions wrong. Keep in mind that past performance and forecasts are not reliable indicators of future returns. When considering Dow Jones price predictions for 2022 and beyond, it’s important to keep in mind that high market volatility and macroeconomic environment make it difficult to produce accurate long-term Dow Jones analysis and estimates. As such, analysts and forecasters can get their Dow Jones forecast wrong. 

It is essential to do your research and always remember your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio, and how comfortable you feel about losing money. You should never invest money that you cannot afford to lose.

Factors That Can Impact the Dow Jones Stock Price  

  • Current News - The price of the Dow Jones is calculated using data from its companies. That is why it is important to keep a close eye on all the major news and results of the companies that weigh the most in this reference index. 
  • Economic Data - Figures may include unemployment, trade balance, GDP growth rate, inflation rate, retail sales, durable goods, industrial orders, business sentiment, or consumer confidence. 
  • U.S. Dollar - The value of the U.S. dollar will affect the export or import profitability of U.S. listed companies. If the U.S. dollar is going down, the stock index tends to rise also. 
  • FED - Communications from the U.S. Federal Reserve on interest rates, as well as the press conferences of these organizations usually impact the Dow Jones index

>> What is the Dow Jones index and how does it work? 

Is Dow Jones a good investment? 

Since its inception in May 1896, the Dow Jones index has returned a total of 1,710.902% with an annualized 2.325%. The values are adjusted for inflation according to the Dow Jones Return Calculator, Dividends Reinvested (DQYDJ). 

In recent years, the Dow Jones price has risen enormously, as can be seen in the above tables. The Dow Jones rate has been tracked since 1896, and in 1976, the 1000-point limit was broken. Subsequently, the limit of 20,000 points was reached in 2017, and the Dow Jones price is now already at more than 30,000 points. 

Nevertheless, the question remains where the limit lies for the Dow Jones index. What has become clear is that the Dow Jones price has become much more volatile, with daily fluctuations of hundreds of points being no exception. 

Analysts outlined in the article viewed the Dow Jones Industrial Average (US30) could reverse the downtrend if inflation started to slow. However, the Fed signaled at the 4 May meeting that further rate hikes were expected as inflation is likely to remain elevated in the coming months.  

Whether or not Dow Jones is a good investment for you depends on your attitude to risk, your expertise in this market, the spread of your portfolio, and how comfortable you feel about losing money. 

>> How to invest in Stock Indices? 

FAQs 

Why has the Dow Jones been going down in 2022? 

The index has been going down in recent weeks due to the Fed’s interest rate hikes. The Fed has increased borrowing costs twice this year and has indicated more increases in the pipeline to bring inflation down to its target of below 2%.  

Rising costs due to spikes in commodity and energy prices – partly induced by the Russia-Ukraine conflict, have also hurt the index on expectations that spiking costs would cut companies’ earnings. In addition, the war has dampened markets’ sentiment and raised uncertainties about economic growth. 

Will Dow Jones go down in 2023? 

If no bad news comes out about one of the 30 companies included in the index, and indicators signal a slowdown in inflation, the Dow Jones is projected to go up in value. 

Is the Dow Jones going to crash in 2023? 

This is unlikely because the DJIA includes only high-quality, economically relevant stocks. If they weaken, either in performance or relevance, they are cut from the index and are replaced by others. 

How to forecast Dow Jones? 

The Dow Jones Industrial Average is a perfect indicator of the US general economic state. The Dow Jones index is quite responsive to domestic and foreign economic and political events. The stock index and local currency trends are often positively correlated.  

How many Dow Jones companies are there? 

DJIA (US30) tracks the stock performance of 30 large publicly-listed companies on the US stock exchanges. A committee of representatives from S&P Dow Jones Indices and The Wall Street Journal selects the companies that appear on the index.  

American Express (AXP), Coca-Cola (KO), Apple (AAPL), Goldman Sachs (GS), Intel (INTC), Microsoft (MSFT), Boeing (BA), Cisco (CSCO), and Walmart (WMT) are among the DJIA's constituents.

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