Warren Buffett is considered one of history’s greatest investors. When he speaks, the market listens. But even the most ardent of Buffett faithful had to be a little surprised with the prediction he made this past week.
He says that the Dow is going to 1,000,000.
Now, before you go piling every last penny into the stock market, let’s put some context around that statement. Buffett said that the Dow will hit 1,000,000 in the next 100 years. In other words, we’re not going to be around to see it. But at least Buffett is optimistic, right? He has long touted the benefits of conservative value investing and cautions against getting caught up in market hype and following the crowd. If a noted conservative like Buffett is talking about Dow 1,000,000, then there must be more big gains ahead for equities, right?
Well, that may not be the case either. For the Dow to hit 1,000,000, it will have to grow by about 45 times its current level of 22,349. But 100 years is a long time. And if you pull out your financial calculator, you’ll find that going from here to Dow 1,000,000 in the next 100 years comes out to an average annual return of…4%!
We’ve been told that the long-term average annual return of the stock market is around 10%. Since the post-financial crisis low, the Dow has returned about 15.5% per year over the subsequent 8 ½ years. Clearly, we’ve grown accustomed to great returns on our money. So given all that, it’s hard to say if Buffett was being optimistic or pessimistic in his prediction. One thing is certain though. When Warren Buffett talks, the market listens.
Here’s is this week’s list of ETFs that you should focus on this coming week.
iShares MSCI United Kingdom ETF (EWU)
The specter of Brexit still hangs over the country but the economy is looking stronger. The Center for Economics and Business Research upgraded its growth forecast for the U.K. by 0.3% this year and 0.2% next year. The improved environment puts the nation’s first rate hike in several years on the table, but improved consumer spending and an increase in the value of the pound sterling has made this a solid year for investors.
