Warren Buffett, the billionaire head of Berkshire Hathaway, clearly isn’t concerned about any kind of stock market bubble. In fact, he’s just as bullish as he’s ever been, recently predicting that a famous benchmark would undoubtedly surge in coming decades. CNN Money has more:
Buffett, a reliable optimist about the future of the U.S., predicted on Tuesday night that the Dow Jones Industrial Average will be “over 1 million” in 100 years. That would be roughly 45 times the Dow’s current level of nearly 22,400, which is already a record high.
“Being short America has been a loser’s game. I predict to you it will continue to be a loser’s game,” the Berkshire Hathaway chairman said. Buffett was speaking at a New York event commemorating the 100th anniversary of Forbes magazine.
While “Dow 1,000,000” may seem ridiculous at this point, when you consider the long-term reality, it actually isn’t at all. To get from current levels to the one million level, the Dow would need to rise at just a 3.87% compounding rate over the next 100 years.
That’s actually well below its historical growth rate, which is closer to 7%, and less than half of its 10.7% annual rate of return from the end of 2008 to the end of 2016.
So in a sense, The Oracle of Omaha is actually being conservative with his outlook.
While short-term concerns — particularly on the geopolitical front — will always exist, it has indeed been very foolish to bet against American companies over the past century. There’s little reason to believe that next 100 years won’t bring more of the same.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was trading at $223.58 per share on Thursday morning, down $0.32 (-0.14%). Year-to-date, DIA has gained 14.89%, versus a 12.53% rise in the benchmark S&P 500 index during the same period.