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Dow Jones ETFs Hit New Yearly High: More Rally in the Cards?

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The Dow Jones Industrial Average achieved a new peak for 2023, thanks to encouraging inflation data and strong Salesforce earnings. The Dow gained 385 points, or 1.1%, reaching approximately 35,676, surpassing its previous yearly high set in August.

The Dow concluded November with an over 8% increase, halting a three-month losing trend. The S&P 500 and Nasdaq Composite also recorded substantial gains, with both nearing their highest points of the year. The S&P 500 remained relatively stable, while the Nasdaq Composite experienced a slight decline due to profit-taking in major tech stocks.

Economic Insights and Market Projections

Chris Zaccarelli of Independent Advisor Alliance highlighted the economy's strength and the Federal Reserve's cautious approach as key factors in the market's positive trend. He anticipates this upward trajectory to continue, reflecting a shift from focusing on potential risks to recognizing positive developments (as quoted on CNBC).

Salesforce's Impact on the Dow's Surge

Salesforce, a cloud software company, led the Dow's rise with its shares jumping 8.9% following impressive fiscal third-quarter earnings. The growth was driven by its cloud data business and artificial intelligence product, Einstein GPT. The stock was up 22.7% in November.

Inflation and Interest Rate Outlook

Inflation data showed a slight decrease in the Federal Reserve's preferred inflation gauge, fueling expectations that the Fed might stop rate hikes and possibly reduce rates in 2024. This, coupled with the cooling inflation figures, positively influenced market sentiment.

Relatively Cheaper Valuation

Cheaper valuation is another tailwind. At the current level, Dow Jones has a P/E of 16.82X, whereas the S&P 500 has a P/E of 17.86X and the Nasdaq-100 has a P/E of 22.70X. This was because the Dow Jones suffered a lot in the first half of 2023, which provided the index the scope to fare better in the second half.

Steepening Yield Curve in the Cards?

As recessionary fears are ebbing and inflation has been falling, the Fed is likely to go slow in its policy tightening spree. The Fed even cut rates in 2024. This situation will result in a steepening of the yield curve. A steepening yield curve is great for bank stocks as the pattern boosts banks’ net interest rate margins.

ETFs in Focus

Against this backdrop, below we highlight a few Dow Jones based ETFs that could be under the radar at the current level. These ETFs areSPDR Dow Jones Industrial Average ETF (DIA - Free Report) , iShares Dow Jones U.S. ETF (IYY - Free Report) and Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) .

(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)




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