Dow 20,000: How It Could Happen

Monday, May 16, 2011

Most first quarter 2011 earnings reports are in and the news is good. Over three-quarters exceeded expectations. Moreover, the results showed a desirable combination of growing revenues, profitability and cash flow. Profit margins are being maintained by cost control, improved productivity and operating leverage. This combination of factors helped push analysts’ 2011 earnings expectations up 4.7% for the Dow Jones Industrial Average (DJIA).

Importantly for investors, stock prices rose less than forecast earnings, making valuations more attractive. The recent focus on “exciting” investments (e.g., silver) has caused U.S. stocks basically to tread water.

Here is the picture –

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