Roger G. Ibbotson, using the forecasting methodology he perfected in 1974, predicts the Dow will top 100,000 in early 2094. It will top 120,000 by the end of the first quarter of the next century, Mr. Ibbotson projected. Detractors should beware: Mr. Ibbotson and Rex Sinquefield, co-authors of a ground-breaking 1976 study of asset class returns, came within 100 points of correctly predicting the Dowís 1998 year-end return. And they correctly projected that the Dow would break 10,000 this year.
The Dow forecasts are based on asset class return forecasts Mr. Ibbotson calculates by adding historic risk premiums from 1925 onward to the Treasury yield curve in any given year.The latest predictions through the end of 2025 are as follows: Large-cap stocks will return 11.6%; small-cap stocks, 10.7%; long-term government bonds, 4.7%; T-bills, 4.5%; and inflation, 3.1%. Each forecast is a median, average, annualized compound return.