Dow on a Record Losing Streak: Should You Buy its ETF?

The Dow Jones Industrial Average has been on its worst losing streak in nearly 50 years as investors continued to rotate out of old economy names and pile into tech stocks and small-caps. The blue-chip index declined for nine consecutive sessions, representing the longest losing streak since February 1978. It lost 3% or more than 1500 points in the past nine days. The historic decline came after the Dow Jones touched 45,000 milestone on Dec. 4.

SPDR Dow Jones Industrial Average ETF DIA, which tracks the Dow Jones Index, has shed 3.5% over the past 9 days.

Inside the Plunge

The Dow Jones has been pulled down, partly due to the recent decline in NVIDIA NVDA stock. It added NVDA stock to its roster on Nov. 8. Since then, NVDA, one of the hottest stocks in the market, has plunged about 12%. A sell-off in healthcare stocks also added to the chaos. UnitedHealth UNH tumbled about 20% in the past 10 days since its CEO Brian Thompson was shot and killed on Dec. 4. Johnson & Johnson JNJ and Amgen AMGN were also down more than 4% each in the past 10 trading sessions.

Financials and industrial sectors, which initially jumped on Trump's win, have also been losing lately on concerns over higher rates and trade uncertainties. Being highly exposed to cyclical sectors, the blue-chip index is not benefiting from the ongoing tech surge (read: Mag 7 ETFs Look Unstoppable Heading Into 2025).

SPDR Dow Jones Industrial Average ETF (DIA)

SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with an AUM of $38.9 billion and an average daily volume of 3 million shares. 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.

SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees.

Time to Buy?

The historic plunge might represent a good entry point for investors. Despite the nine-day slide, the outlook for the blue-chip index is quite promising. The Dow Jones is still up 15.3% this year and 3.5% from the Election Day.

The Dow Jones is poised to rally when the economy grows. The U.S. economy has been expanding with rising consumer confidence and higher spending power. Economic output increased to the highest level in nearly three years in December. S&P Global's flash US composite PMI, which captures activity in both the services and manufacturing sectors, came in at 56.6 in December, up from 54.9 in August. Retail sales rose faster than expected in November, reflecting continued resilience in consumer spending and strong economic momentum.

The incoming Trump administration is expected to provide a boost to the economy, driving the Dow Jones higher. Further, the prospect of lower interest bodes well for the blue-chip index. Lower interest rates generally lead to reduced borrowing costs that help businesses expand their operations more easily and increase profitability. This, in turn, stimulates economic growth (read: 2025 Market Outlook & Investment Strategies).

A strategist at Deutsche Bank predicts that global trade is the biggest risk heading into 2025 with President-elect Donald Trump's inauguration. The strategist believes concerns over inflation and bond yields as well as a plunge in the tech sector will favor Dow Jones.

The Dow ETF sports a Zacks ETF Rank #1 (Strong Buy) with a Medium risk, suggesting outperformance in the months ahead.