Dow 20,000? From Bernstein’s Lips to Everyone’s Ears

I had lunch earlier this week with Ryan Martinez, a savvy, Los Angeles-based financial advisor with Alliance Bernstein, one of the nation’s most highly respected portfolio management firms, who told me his chief investment officer predicted that the Dow Jones Industrial Average will hit 20,000 in the next five to 10 years.
 
If the prognostication came from a brokerage firm, a cynic would  say the forecast was  biased, unveiled to spur more demand of  stock buys generating larger commissions.   But Bernstein is not a brokerage house.  They are in fact the  purchasers of equities and not stock sellers.
 
“Our projected stock returns may sound optimistic, but they are not,” wrote Seth J. Masters, chief investment officer of Bernstein Global Wealth Management, in a position paper. “They are well below the long-term average for U.S. and global equities and are based on conservative assumptions about economic and market conditions.”
 
Even though interest rates are at historic lows, institutional and individual investors nonetheless have been rapidly moving their capital to cash and bonds and away from equities. So maybe now, or soon, it is time to take the less-traveled  road, despite the unsettling news we read every day about the shaky economy.
 
Martinez, always the voice of reason, told me that the 20,000 Dow projection “in no way reflects short-term positioning.  It’s hard to time the market, and you don’t want to be extreme on either end of the spectrum.”
 
The cynic in me thinks Alliance Bernstein may be  using its clout and media know-how to start a rumor, albeit one that we all hope is true and becomes a self-fulfilling prophecy.  But these are smart folks, their hypothesis seems sound and conservative, and their prediction is receiving widespread publicity, including a Sunday column in the NewYork Times.
 
So all I have to say is …  From Bernstein’s Lips to Everyone’s ears.

— Roger Pondel, rpondel@pondel.com