April 21, 2018

Dow Jones Industrials: Can Markets Rally Past 20,000?

Dow Jones Industrials: Can Markets Rally Past 20,000?

By Richard Cox

For investors, positions in the Dow Jones Industrial Average Trust (NYSE: DIA) have minted money for the majority of FY2016. The ETF closed above $ 200 in January, and this essentially signifies a rise in the Dow Jones above the closely-watched 20,000 mark. The DIA ETF has made a 52-week range between $155.26 to $200.55, with its bottom forming in the month of February 2016.  This was later followed by the upward trajectory defining the current rally, and investors are now wondering if these trends can keep the Dow Jones Industrials comfortably above the 20,000 going forward.

If you are looking to establish positions in these markets, experts will generally recommend that you open an account with a CFD trading broker that will enable access to profitable positioning trades.  From the lows in February, the DIA ETF has moved almost 29 percent, beating many of the most commonly traded assets available in the financial markets.  During his period, the Dow moved from ~16000 to ~20000, giving a return of 25 percent for investors.  For these reasons, it is more than likely that market attention will be focused on these levels in the months ahead.

Dow Jones Characteristics

The fund tracks the price-weighted index of 20 large-cap stocks, which are identified by the Wall Street Journal’s editor. Though it is perceived as a large-cap tracker, the selection of stocks produces a significant sectorial bias that is related to many US industrial and manufacturing companies. Hence, the stock is not an ideal candidate for the investors who wants to track the large caps of the US stock market but would instead be looking for access to these key sectors.

From a valuation perspective, the rising GDP in the United States along with the rise in energy prices from the lows of $ 26 per barrel to $ 45 per barrel had aided the Industrials sector to perform better in the past year, in turn helping the Dow Jones.  

The increased consumer confidence and improved spending numbers seen during the year have helped the industrial portion of the market perform better. The bias of the DIA had been towards industrial which has helped the stock to provide smart gains during the past twelve months.

Market Trends in 2017

2017 is expected to have lower unemployment rate along with supply side tax soaps from the new administration. These will aid the economy to have an average growth of about 2.6 percent implying a stronger economic activity. Also, the earnings estimates suggest that the EPS would be around $ 132.61 indicating a growth of about 12 percent.

If we use the current PE multiple of the market to extrapolate the future value of the Dow Jones, it clearly indicates that the indices are going to have a fun ride in 2017. This scenario augurs well for large-cap oriented funds like DIA in 2017.


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