Can Dow ETFs Be A Winner In 2020?

The Dow Jones industrial average is up 19.6% this year (as of Dec 9, 2019), thanks to a dovish Fed and occasional cues of improvement in the U.S.-China trade relation. However, the index has still underperformed its other two cousins – the S&P 500 (up 24.9%) and the Nasdaq (up 29.3%).

However, as the 2020 is about to begin, some economic and political factors look more favorable for the Dow Jones. Investors should note that SPDR Dow Jones Industrial Average ETF (DIA - Free Report) has a Zacks Rank #1 (Strong Buy).

Let’s take a look at the factors that can drive a 2020 rally for Dow Jones ETFs.

U.S.-China Trade Optimism

The Dow Jones is about to gain from trade optimism as U.S.-China trade talks are highly related to the manufacturing sector and exports. The deadline for the interim “phase one” deal between the U.S. and China is approaching fast. New tariffs on smartphones, laptops and toys imported from China will be enacted on Sunday, Dec 15, unless a deal is cracked. In such a scenario, U.S. President Donald Trump commented that trade talks with China were going well, which is a positive for the markets and especially Dow Jones.

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 are performing exceptionally of late. Also, large-cap stocks have substantial foreign exposure and thus perform better in a weaker dollar environment — like what we are witnessing now thanks to a 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.

Boeing’s Expected Price Gains

Boeing holds 8.56% of the fund DIA, securing the top spot. So, the company’s performance matters a lot. Its stock is up only 8.5% this year (as of Dec 9, 2019), having suffered a lot due to its 737 MAX jetliner. The cost of grounding 737 MAX after two fatal crashes continues to go up. However, the company still hopes to get regulatory approval soon, despite the delay so far. If the issue gets resolved, Boeing shares may go higher.

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