Below are the valuation targets for the Dow Jones Industrial Average for the next 10 years.
Our valuation targets for the Dow Jones Industrial Average in 2018 are:
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28,845.60 (overvalued)
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25,310.60 (fair value)
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21,775.60 (undervalued)
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14,422.80 (extreme undervalue)
The valuation targets for the Dow Jones Industrial Average are based on a dividend growth rate of 6.57% which is derived from the lowest average annual growth rate from Barron’s over the last 38 years and applied to Edson Gould’s Altimeter. A graphical representation of the overvalued, fair value, and undervalued levels are below.
The above Altimeter translates into the following undervalued and overvalued ranges since 1994:
10-Year Targets
| Year | Undervalued | Fair Value | Overvalued | Extreme Undervalue |
| 2018 | 21,775.60 | 25,310.60 | 28,845.60 | 14,422.80 |
| 2019 | 23,206.26 | 26,973.51 | 30,740.76 | 15,370.38 |
| 2020 | 24,730.91 | 28,745.67 | 32,760.42 | 16,380.21 |
| 2021 | 26,355.73 | 30,634.26 | 34,912.78 | 17,456.39 |
| 2022 | 28,087.30 | 32,646.93 | 37,206.55 | 18,603.28 |
| 2023 | 29,932.64 | 34,791.83 | 39,651.02 | 19,825.51 |
| 2024 | 31,899.21 | 37,077.65 | 42,256.10 | 21,128.05 |
| 2025 | 33,994.99 | 39,513.65 | 45,032.32 | 22,516.16 |
| 2026 | 36,228.46 | 42,109.70 | 47,990.95 | 23,995.47 |
| 2027 | 38,608.67 | 44,876.31 | 51,143.95 | 25,571.98 |
| 2028 | 41,145.26 | 47,824.68 | 54,504.11 | 27,252.05 |
| 2029 | 43,848.50 | 50,966.76 | 58,085.03 | 29,042.51 |
| 2030 | 46,729.35 | 54,315.28 | 61,901.21 | 30,950.61 |
| 2031 | 49,799.47 | 57,883.79 | 65,968.12 | 32,984.06 |
Observations
We have a range from as low as 15,370.38 to as high as 39,651.02 in period from 2019 to 2023. The Dow Jones Industrial Average is currently undervalued based on 2019 estimates. It is best to expect that it will decline to the extreme level of 15,370.38.
Targets based on dividend yield:
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1%: 56,560.00
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2%: 28,280.00
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2.74%: 20,642.34 (2016 low)
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3%: 18,853.33
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4%: 14,140.00
Last updated: December 26, 2018