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Can Dow Jones ETF Reverse From the Worst Losing Streak in 50 Years?
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The Dow Jones Industrial Average is experiencing its longest losing streak since 1978, falling for nine successive trading days. This marks a significant downturn, with the index dropping roughly 3%, or over 1,500 points, from its record close of 45,014 on Dec. 4 to 43,499 as of Dec. 17, 2024.
In the same period, the S&P 500 dipped by about 0.6%, while the Nasdaq Composite gained nearly 2%. The divergence is caused by the Dow Jones’ (up 15.8% YTD as of Dec. 17, 2024) less exposure to the tech rally that has bolstered the S&P 500 (up 28%) and the Nasdaq (up 33.9%).
Limited Exposure to Tech’s "Magnificent Seven"
The Dow’s 30 components include just four of the "Magnificent Seven" tech stocks: Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) , Apple (AAPL - Free Report) and NVIDIA (NVDA - Free Report) . This limits its benefits from the massive gains in Tesla (TSLA - Free Report) , up over 37% in the last 10 days, and Alphabet GOOGL, (GOOG - Free Report) , up 14% during the same period.
Meanwhile, NVIDIA, added to the Dow on Nov. 8, has lost 3% in the past month and is off about 1% in the past week (as of Dec. 17, 2024). The NVIDIA stock has dropped nearly 7% since Dec. 5, contributing to the Dow Jones’ decline.
Healthcare Stocks Dragging the Dow Down
A sharp sell-off in healthcare stocks has also weighed heavily on the index. UnitedHealth (UNH - Free Report) has declined about 20% in the past 10 days (as of Dec. 17, 2024). Other healthcare giants, including Johnson & Johnson (JNJ - Free Report) and Amgen (AMGN - Free Report) , have each fallen more than 4% in the same timeframe. Health insurance companies have seen their shares fall as Trump said, “we're going to knock out the middleman.”
Value Stocks Underperforming Growth Stocks
The Dow Jones’ struggles lie in the fact that value stocks have underperformed growth stocks in recent months. The Dow Jones has more value exposure than the S&P 500 and the Nasdaq. In 2024, growth stocks surged due to low rates and the tech boom (which is highly growth-oriented) driven by the artificial intelligence (AI) rally.
Outlook for 2025
The year 2025 will likely bring many surprises in the form of Trump 2.0 era, its impact on global trade and inflation and the resultant Fed moves. If Trump’s protectionist agenda and tariff war drive up domestic inflation, we may see hawkishness in the Fed’s ongoing dovish stance. The rate cuts next year may be lower, in terms of both frequency and magnitude.
If NVIDIA shares fail to shine like before, the Dow Jones may not see a surge like its other peers – the S&P 500 and the Nasdaq. The rising stars of the “Mag 7” group — Tesla and Alphabet — are absent in the Dow Jones, at the current level (read: Mag 7 ETFs Look Unstoppable Heading Into 2025).
The future of the largest Dow component – UNH – is also uncertain in the Trump era. The Dow Jones’ largest exposure is in financial stocks. If the geopolitical risks rise in the Trump 2.0 era, we may see a subdued increase in long-term U.S. treasury bond yields, resulting in flattening of the yield curve. Financials stocks underperform in such a scenario.
So, overall, the Dow Jones’ performance should be moderate-to-upbeat in 2025, if not great. Investors can keep a close tab on SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report) . Holding 30 blue-chip stocks, the fund is widely spread across components, with each having less than an 8.2% share. Financials (23.8%), information technology (20.8%), consumer discretionary (14.3%), healthcare (14.1%) and industrials (12.9%) are the top five sectors.
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Can Dow Jones ETF Reverse From the Worst Losing Streak in 50 Years?
The Dow Jones Industrial Average is experiencing its longest losing streak since 1978, falling for nine successive trading days. This marks a significant downturn, with the index dropping roughly 3%, or over 1,500 points, from its record close of 45,014 on Dec. 4 to 43,499 as of Dec. 17, 2024.
In the same period, the S&P 500 dipped by about 0.6%, while the Nasdaq Composite gained nearly 2%. The divergence is caused by the Dow Jones’ (up 15.8% YTD as of Dec. 17, 2024) less exposure to the tech rally that has bolstered the S&P 500 (up 28%) and the Nasdaq (up 33.9%).
Limited Exposure to Tech’s "Magnificent Seven"
The Dow’s 30 components include just four of the "Magnificent Seven" tech stocks: Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) , Apple (AAPL - Free Report) and NVIDIA (NVDA - Free Report) . This limits its benefits from the massive gains in Tesla (TSLA - Free Report) , up over 37% in the last 10 days, and Alphabet GOOGL, (GOOG - Free Report) , up 14% during the same period.
Meanwhile, NVIDIA, added to the Dow on Nov. 8, has lost 3% in the past month and is off about 1% in the past week (as of Dec. 17, 2024). The NVIDIA stock has dropped nearly 7% since Dec. 5, contributing to the Dow Jones’ decline.
Healthcare Stocks Dragging the Dow Down
A sharp sell-off in healthcare stocks has also weighed heavily on the index. UnitedHealth (UNH - Free Report) has declined about 20% in the past 10 days (as of Dec. 17, 2024). Other healthcare giants, including Johnson & Johnson (JNJ - Free Report) and Amgen (AMGN - Free Report) , have each fallen more than 4% in the same timeframe. Health insurance companies have seen their shares fall as Trump said, “we're going to knock out the middleman.”
Value Stocks Underperforming Growth Stocks
The Dow Jones’ struggles lie in the fact that value stocks have underperformed growth stocks in recent months. The Dow Jones has more value exposure than the S&P 500 and the Nasdaq. In 2024, growth stocks surged due to low rates and the tech boom (which is highly growth-oriented) driven by the artificial intelligence (AI) rally.
Outlook for 2025
The year 2025 will likely bring many surprises in the form of Trump 2.0 era, its impact on global trade and inflation and the resultant Fed moves. If Trump’s protectionist agenda and tariff war drive up domestic inflation, we may see hawkishness in the Fed’s ongoing dovish stance. The rate cuts next year may be lower, in terms of both frequency and magnitude.
If this happens, we may find the Dow Jones faring better than now. But then, NVIDIA is losing its luster slightly to other emerging chipmakers like Broadcom (AVGO - Free Report) and Marvell Technology (MRVL - Free Report) (read: Broadcom Hits $1T Market Cap: Are Broadcom ETFs the Next NVIDIA?).
If NVIDIA shares fail to shine like before, the Dow Jones may not see a surge like its other peers – the S&P 500 and the Nasdaq. The rising stars of the “Mag 7” group — Tesla and Alphabet — are absent in the Dow Jones, at the current level (read: Mag 7 ETFs Look Unstoppable Heading Into 2025).
The future of the largest Dow component – UNH – is also uncertain in the Trump era. The Dow Jones’ largest exposure is in financial stocks. If the geopolitical risks rise in the Trump 2.0 era, we may see a subdued increase in long-term U.S. treasury bond yields, resulting in flattening of the yield curve. Financials stocks underperform in such a scenario.
So, overall, the Dow Jones’ performance should be moderate-to-upbeat in 2025, if not great. Investors can keep a close tab on SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report) . Holding 30 blue-chip stocks, the fund is widely spread across components, with each having less than an 8.2% share. Financials (23.8%), information technology (20.8%), consumer discretionary (14.3%), healthcare (14.1%) and industrials (12.9%) are the top five sectors.