Why you should keep an eye on Dow Jones Index right now
Among the three major U.S. stock indices, the $Dow Jones Industrial Average (.DJI.US)$ often gets overshadowed by the $S&P 500 Index (.SPX.US)$ and $Nasdaq Composite Index (.IXIC.US)$ . However, since July, the Dow has not only outpaced these two indices but also reached an all-time high on August 30.
![Source: moomoo. Data as of Sep 10, 2024, for reference only and does not constitute investment advic](https://ussnsimg.moomoo.com/sns_client_feed/77777025/20240912/1726106026760-2a25420d3c.jpeg/big?area=999&is_public=true)
This shift suggests that funds might be moving out of tech stocks and into traditional industries.
Considering this trend could continue, it may be a good time to explore investment opportunities in DJI now. Join Moomoo Learn as we delve into its ins and outs.
What is the Dow Jones Index?
The DJI has a much longer history than the S&P 500 and Nasdaq. Let’s take a look at what sectors make up the Dow today.
![Source: moomoo. This content is for reference only and does not constitute investment advice.](https://ussnsimg.moomoo.com/sns_client_feed/77777025/20240912/1726106081258-db75c175b7.jpeg/big?area=999&is_public=true)
Traditional industries hold a significant portion, while technology sector makes up a smaller percentage compared to the S&P 500’s 31.4% and Nasdaq’s 51.0%.
The Dow has only 30 components, far fewer than the other two indices. Here are its top ten components:
![Source: moomoo. This content is for reference only and does not constitute investment advice.](https://ussnsimg.moomoo.com/sns_client_feed/77777025/20240912/1726106312708-d39d4cdec5.jpeg/big?area=999&is_public=true)
This composition is quite different from the S&P 500 and Nasdaq, which are heavily dominated by the Magnificent 7 Stocks. This is because the Dow ranks its constituents according to their prices rather than market cap, reducing the impact of mega-cap companies like $Microsoft (MSFT.US)$.
How did the DJI perform against the other two major indices?
The Dow doesn't always include the top-performing stocks, and even when it does, they might not have a high weighting. For instance, despite its impressive recent gains, $NVIDIA (NVDA.US)$ isn't in the Dow. If it were added, it would only rank 23rd by stock price.
This explains why the Dow often underperforms compared to the S&P 500 and Nasdaq. Here's a look at their historical performance: (data as of Sep 10, 2024, for reference only)
Last 1 year:
Dow: 18.1%
S&P 500: 22.7%
Nasdaq: 22.7%
Last 5 years:
Dow: 51.7%
S&P 500: 83.6%
Nasdaq: 109%
Last 10 years:
Dow: 139%
S&P 500: 174%
Nasdaq: 268%
However, the Dow's lower reliance on high-flying tech stocks could make it more resilient during bear markets. Take the 2022 bear market as an example:
Dow: -8.8%
S&P 500: -19.4%
Nasdaq: -33.1%
Recent performance analysis
The Dow's recent strong performance has been largely driven by its top component, $UnitedHealth (UNH.US)$, and stocks in the consumer staples sector.
UnitedHealth has seen continuous gains since July, primarily due to its Q2 earnings beating market expectations. Given that UnitedHealth holds nearly a 10% weighting in the Dow, investors should closely monitor its fundamental changes and market expectations.
![Source: moomoo. Data as of Sep 10, 2024, for reference only and does not constitute investment advic](https://ussnsimg.moomoo.com/sns_client_feed/77777025/20240912/1726106650224-43a570cfc5.jpeg/big?area=999&is_public=true)
Consumer staples have recently performed well, boosted by rate-cut speculations. Stocks like $McDonald's (MCD.US)$, $Procter & Gamble (PG.US)$, $3M (MMM.US)$, $Walmart (WMT.US)$have significantly risen, positively impacting the Dow. Dow-focused investors should monitor these stocks' trends.
A Conservative strategy: "Dogs of the Dow"
For investors concerned about recent market trends, the "Dogs of the Dow" strategy may offer a defensive approach.
This straightforward strategy involves buying the 10 highest dividend-yielding stocks from the Dow. Higher dividend yields may indicate undervalued stocks, which could potentially deliver above-average returns in unfavorable market conditions.
For example, in 2022, while the Dow fell by 8.8%, the "Dogs of the Dow" portfolio gained 2.2% (including dividends).
Here is the "Dogs of the Dow For 2024" list, while WBA has been replaced by MRK.
![Why you should keep an eye on Dow Jones Index right now](https://ussnsimg.moomoo.com/sns_client_feed/77777025/20240912/1726106795320-80582ef0ae.jpeg/big?area=999&is_public=true)
Bottom Line
To summarize,
1. The Dow has the potential to outperform when tech stocks are underperforming.
2. For risk-averse investors, the "Dogs of the Dow" strategy may offer a defensive investment approach.
Lastly, here are two ways to invest in the Dow on the moomoo platform:
2. ETFs: Go to the DJI's Detailed Quotes > ETFs (you can also view component stocks here)
![Source: moomoo. This content is for reference only and does not constitute investment advice.](https://ussnsimg.moomoo.com/sns_client_feed/77777025/20240912/1726106845689-2479173592.jpeg/big?area=999&is_public=true)
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
Read more
Comment
Sign in to post a comment
102188573 : Historically, Sep is not friendly for stock market
Chaoren1993 : Bank stocks are quite bearish now so avoid Dow for now
103824105 : Hi, how much is a point move in the micro e-mini Dow, say 40950 to 40951 up one point,anyone?
102188573 Chaoren1993 : There's few bank stock in Dow Jones Index