Donald Trump lately said that the Dow might attain 100,000 by the top of his presidency, and the standard crowd instantly rushed to both cheer or ridicule the assertion with out understanding why such a quantity is even potential. The issue with trendy evaluation is that it assumes markets rise as a result of governments are doing one thing proper. Historical past exhibits the precise reverse. Markets rise to excessive nominal ranges when confidence in authorities is collapsing worldwide, and the US has change into the final protected haven for capital.
The US stays the final functioning protected haven for international capital as a result of each different is worse. Europe is imploding beneath regulation, warfare danger, and Marxist ideology. Asia is fragmented by capital controls and demographic collapse. Rising markets stay structurally unstable. That leaves the USA by default.
Capital is fleeing authorities debt globally. Sovereign bonds are not risk-free property; they’re political devices backed by bancrupt stability sheets. As confidence erodes, capital migrates into personal property like equities, actual property, commodities, and something that’s not a authorities promise.
A rising Dow on this atmosphere isn’t a celebration of prosperity. It’s a warning sign. We’ve got seen this repeatedly all through historical past. Inventory markets rise sharply during times of financial debasement and political instability as a result of cash is being repriced downward. The index rises as a result of the forex falls, not as a result of actual wealth is increasing.
The Financial Confidence Mannequin has by no means proven a clear growth cycle into the late 2020s. What it exhibits as an alternative is rising volatility, sovereign stress, and geopolitical fracture. That doesn’t cease markets from rising, but it surely modifications why they rise. Capital concentrates, participation slims, and volatility expands. Governments reply with dangerous insurance policies, akin to taxes, controls, and laws, which solely speed up capital flight.
Dow 100,000 in a collapsing confidence atmosphere doesn’t imply the typical individual is healthier off. It means cash has nowhere else to go. The US is the perfect of a foul bunch of countries ,slowly dropping off as a result of sovereign debt disaster. We are able to look to the Dow because the true indicator of world capital on an institutional foundation, whereas Nasdaq is extra retail, and the S&P incorporates a little bit of each.
Markets don’t transfer in straight traces. Even when capital continues flowing into the U.S., there can be sharp corrections, political shocks, and coverage errors alongside the best way. So the actual problem isn’t whether or not the Dow can mathematically attain 100,000. The query is what circumstances would produce that end result. Based mostly on the pc, the perpetrator can be international confidence collapsing to the purpose the place capital is pressured into the final remaining open market.
