Prediction: The Dow Jones Industrial Average Will Hit 1 Million Within 50 Years. Here’s Why. | The Motley Fool

With the Dow Jones Industrial Average (^DJI -0.38%) sitting around 40,000, it may seem like a big stretch to expect it to reach 1 million at any point. But it isn’t as far-fetched as it seems. After all, in the year 1900, the Dow was at 66. That isn’t a typo. Can you imagine how outlandish it might have seemed if someone back then had predicted the index ever reaching 1,000. But we’re more than an order of magnitude beyond that point today.

It likely won’t take a century for the Dow to reach the 1 million milestone. In fact, I’m going to make the prediction that the Dow Jones Industrial Average — which tracks 30 of the largest U.S. companies and whose value is tied to the value of those companies — will cross that level within the next 50 years.

Dow Jones Industrial Average to 1 million? Here’s how.

Here’s my logic in making this seemingly bold prediction. As I’m writing this, the Dow Jones Industrial Average (more commonly known as “The Dow” or “The Dow Jones”) is sitting right around 40,400. This is significantly below its all-time high of 45,073, which was reached in December 2024. For the purpose of keeping the numbers simple, let’s say that we’re starting this thought experiment with the Dow at 40,000.

Over the long run, the stock market has produced annualized total returns of about 9%-10%, depending on the exact period you’re looking at. Remember this includes years with a gain and years with a loss. Of course, some of this comes from dividends and some comes from gains in the index itself. Let’s assume for the purpose of this discussion that over the long term, the Dow will average a 3% dividend yield (it’s currently about 1.7%), and a 7% average annual gain in the index itself, for a total annualized return of 10%.

To clarify, in some years the gains will be much greater, and there will almost certainly be years over the next half-century when the Dow loses value. We’re just considering what it could do over time, based on what it’s done in the past.

Having said that, if we’re starting at a level of 40,000, here’s how the index could climb over time, using a 7% growth rate.

Author’s calculations, using a 7% annual growth rate.

Of course, these are just hypothetical figures based on a 7% annualized growth rate in the Dow. Over time, the index isn’t likely to grow by exactly this amount, and it almost certainly won’t be in a linear fashion. Plus, we have no idea what the overall stock market or economy will be doing 50 years from now.

However, the point these numbers make is a very valid one: A level of 1,000,000 for the Dow Jones Industrial Average isn’t just possible, but based on historical performance, it wouldn’t even be much of a stretch.

But what about the current economic uncertainty?

When I make predictions like this to friends who invest, some of the pushback I get is along the lines of “Well, what if the trade war intensifies and lasts for years?” or “What if the stock market crashes?” I’ve even been asked questions like “What if World War 3 happens?”

Those are all valid questions and I, in response, turn to this 2008 quote from Warren Buffett:

In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

In other words, the stock market can crash in any given year. It will almost certainly happen at least a few times within the next 50 years. But the point is that the U.S. economy has been through a lot, and the Dow has gone up over time. While we can’t see the future, it is likely to keep doing the same, no matter what.