Dow Jones ETFs to Soar Further After Best Quarter Since 1987?

It has mostly been noticed that Dow Jones appear to be the most vulnerable index to the socio-economic changes among the big three — S&P 500, the Nasdaq, the Dow Jones. Be it U.S.-China trade war, oil price volatility or the coronavirus pandemic, the Dow suffers the most.

No wonder, this key U.S. index lagged its two bigger counterparts amid the pandemic-led selloff in early 2020. But as unprecedented stimulus measures by global central banks and governments triggered a market rally, Dow Jones swiftly logged its best quarter since 1987 in Q2.

That’s not all. Below we highlight a few reasons that say the Dow Jones has more room to run.

Boeing Relief in the Cards?

In May, Dow’s key holding Boeing BA has resumed production of the 737 Max, which was shelved following fatal accidents. Boeing also started a series of long-delayed flight tests of its redesigned 737 MAX with the U.S. aviation regulator this week. The long-awaited certification test flights boosted Boeing’s shares materially at June-end. It looks like cloud over Boeing’s business appears to clear.

Pandemic-Disrupted Industries to Be Treated Specially?

Treasury Secretary Steven Mnuchin said on Jun 30 that any further fiscal relief to businesses would be “targeted to specific industries” most disturbed by the pandemic. Mnuchin added that hopefully the bill to repurpose Paycheck Protection Program (PPP) funds will be through by the end of July, when key measures provided by the original legislation are set to expire. Since, the index endured the most amid the pandemic, such special benefits toward laggards should boost the key equity gauge.

Oil Rally

Furthermore, it has been noticed that Dow Jones shares a deep relationship with oil price movement. Though the energy sector rally spreads optimism over the broader market as a whole, in most cases, on a particular day of oil surge, the rise in the Dow Jones is steeper than that of the S&P 500, or vice versa.

Oil prices lately made a comeback post the OPEC+ deal on output cut extension. Plus, the latest API data of depleting U.S. crude inventories has favored oil. The American Petroleum Institute (API) estimated a major draw in crude oil inventories of 8.156 million barrels (biggest this year) for the week ending Jun 26.

The economic reopening trade should also favor oil prices to some extent. Overall, on the oil front, the Dow Jones index does have a reason to cheer.

Focus on Blue-Chip Stocks

The Dow Jones assigns greater weight to higher-priced stocks, which is one of the reasons behind the recent surge. Overall, blue chip stocks have been performing nicely of late. Also, large-cap stocks have substantial foreign exposure and thus perform better in a weaker dollar environment — like what we are likely to witness thanks to a super-dovish Fed. Now, since the Dow Jones is a price-weighted index, bullishness over this high-priced large-cap cohort has made the case for the Dow investing more appealing.

ETFs in Focus

Therefore, investors seeking a momentum play, can bet on SPDR Dow Jones Industrial Average ETF DIA, Invesco Dow Jones Industrial Average Dividend ETF DJD and iShares Dow Jones US ETF IYY. Investors can also settle for leveraged Dow ETF plays as long as the trend favors them. Here, ProShares Ultra Dow30 DDM and ProShares UltraPro Dow30 UDOW are a couple of choices.

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The Boeing Company (BA) : Free Stock Analysis Report
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
iShares Dow Jones U.S. ETF (IYY): ETF Research Reports
 
Invesco Dow Jones Industrial Average Dividend ETF (DJD): ETF Research Reports
 
ProShares UltraPro Dow30 (UDOW): ETF Research Reports
 
Proshares Ultra Dow30 (DDM): ETF Research Reports
 
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