24/7 Wall St. has some serious concerns entering 2019 in using an analyst-driven consensus forecasting model alone, even if it has been rather useful in prior years. It seems fair to worry that the consensus analyst price targets heading into the end of 2018 generally seem to have not been brought down enough in many of the Dow stocks, when you consider how far off of the highs many companies closed out 2018. Still, a preset model is merely a means of calculation, and it allows investors to judge the state of the overall market.

Investors should consider a few things about the market heading into 2019. The Dow ended 2018 with a market capitalization of $5.56 trillion. The S&P 500, a broader and more fairly calculated index than the Dow, was valued at the end of 2018 at roughly 17.7 times trailing earnings, but the index was valued at 15.5 times forward earnings for the end of 2016. For the record, these are not exactly “bubble valuations” by any measure. As 2018 ended, the average (mean) dividend yield of all 30 Dow stocks was 2.7%. That compares to an average Dow dividend yield of 2.4% at the start of 2018 and 2.6% at the start of 2017. These are against 2018-ending yields of 2.68% on the 10-year Treasury note and 3.02% on the Treasury’s 30-year “long bond.”

At the start of 2018, seven of the 30 Dow stocks had higher share prices than the consensus price targets. At the start of 2018, the average upside of almost 4.4% to consensus targets would create an expected total return of roughly 6.75% for 2018. By combining the yields and price gains, the level came to almost 26,400 at the start of 2018.

Again, there seem to be some issues with this forecasting model here at the start of 2019. It is an attempt to form a consensus target pooling other consensus data, and it does not take dividend increases and stock buybacks into account. With a projected price increase of 20.2% on top of the 23,327.46 close of 2018, the current model’s 2019 forecast would be 28,039.60. Let’s call it 28,000 for rounding purposes. If you want to count the dividends in the implied upside calculations, it would generate a 2019 equivalent target of 28,669 for total return investors.

Before thinking that the stock market will surge to new highs and then some in 2019, serious thought needs to be used for balance here. First and foremost, it seems very likely that analysts will be lowering their price targets in January and early in 2019 to make their expected views more reachable. It’s just not normal to see consensus upside projections of over 20% for the market as a whole, particularly at this stage in the business cycle. Again, this would mark the 10th year of a bull market, if the market recovers back to its prior highs and goes higher. For gains of 20% or more to be real, here are just some of the hurdles that would have to likely happen: the Fed has to seriously slow its rate hikes, companies have to overcome inner-industry pressure in almost every sector, the China trade spat has to be resolved, the new congressional members have to not spend their whole time investigating and fighting every bill and policy, emerging markets need to stabilize, corporate earnings have to expand more than expected, buybacks and dividend hikes need to exceed already high expectations, Brexit needs to be contained or go smoothly, and housing cannot stagnate further. Oh, and international issues and geopolitics need to run smoothly. How likely does that all sound?

You have been given more than your fair share of warnings and caveats. Here is a review of all 30 Dow stocks, where they stood as 2019 kicked off, particularly some of the risks and hurdles for 2019, and how each one could help the Dow get to that 28,000 mark in 2019.

3M: Pain in 2018 After Solid 2017

3M Co. (NYSE: MMM) proved in 2018 that the 31% gain in 2017 was too far and too fast. It lost 19% in 2018. Conglomerates are no longer that popular, but 3M dealt its investors some pain all on its own with guidance and the conference calls after earnings later in 2018. The company was still able to keep growing its dividend year after year, and that is likely to continue. 3M shares closed out 2018 at $190.54, but the $203.94 consensus target price is lower than a year ago and implies a gain of about 9.9% ahead when including the 2.9% dividend yield. 3M ended 2018 valued at almost 21 times trailing earnings, but it was valued at just 17.6 times next year’s earnings estimate.