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Amid the ongoing broad market rally driven by bets of the Fed nearing an end to its interest rate hike cycle, the Dow Jones Industrial Average is catching up pretty well, hitting its highest level in nearly two years. In fact, the blue-chip index has been outperforming over the past three months, rising 5.1% compared with a 3.6% gain for the broad market S&P 500 Index.
Investors seeking to tap the strength in the Dow Jones trend can consider SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , iShares Dow Jones U.S. ETF (IYY - Free Report) , Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) , First Trust Dow 30 Equal Weight ETF (EDOW - Free Report) , Nationwide Dow Jones Risk-Managed Income ETF , ProShares Ultra Dow30 ETF (DDM - Free Report) and ProShares UltraPro Dow30 (UDOW - Free Report) .
The S&P 500 is about 4% below its all-time high reached in January 2022, while the Dow is just 1.2% below its record. The outperformance came as the rally broadened out in recent weeks after the astounding surge of the “Magnificent Seven” stocks. Cyclical stocks, bank stocks and small-cap stocks have all shown an upward trend, indicating that the market is in a state of expansion, supporting the uptrend in equities (read: Magnificent Seven ETFs: A Review of 2023 & What Lies Ahead).
According to Bespoke, the Dow Jones has notched an all-time high on a total return basis, which includes dividend payments. The index is up 12% this year on a total return basis.
Being cyclical in nature, the blue-chip index outperforms when economic growth improves. Americans are now feeling more confident about the economy than they did over the past few months. This is especially true as consumer sentiment, as indicated by the preliminary reading on the University of Michigan preliminary index, rebounded sharply in early December and broke the streak of four consecutive months of decline (read: ETFs Set to Gain Amid Robust Holiday Consumer Sentiment).
Inflation is slowing, which will eventually lead to potential cuts to short-term interest rates by the Fed, leading to more growth on the way.
ETFs to Tap
SPDR Dow Jones Industrial Average ETF (DIA - Free Report)
SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with AUM of $31.3 billion and an average daily volume of 3.6 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket with each making up for less than 10% share. Financials (20.3%), healthcare (19.6%), information technology (19.5%), industrials (14.6%) and consumer discretionary (13.2%) are the top five sectors.
SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares Dow Jones U.S. ETF tracks the Dow Jones U.S. Index, holding 1078 stocks in its basket, with none accounting for more than 6.6% of the assets. Information technology takes the largest share at 28.3%, while financials, healthcare and consumer discretionary round off the next spots with double-digit exposure each.
iShares Dow Jones U.S. ETF has amassed $1.7 billion in its asset base while trading in an average daily volume of 42,000 shares. It charges 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Dow Jones ETFs Hit New Yearly High: More Rally in the Cards?).
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
Invesco Dow Jones Industrial Average Dividend ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 28 stocks in its basket, with none accounting for more than 10.7% of the assets.
Invesco Dow Jones Industrial Average Dividend ETF has been able to manage assets worth $309.2 million while trading in a volume of 63,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
First Trust Dow 30 Equal Weight ETF offers equal-weight exposure to all the 30 components of the Dow Jones Industrial Average by tracking the Dow Jones Industrial Average Equal Weight Index.
First Trust Dow 30 Equal Weight ETF has accumulated $258.5 million in its asset base and trades in average daily volume of 39,000 shares. It charges 50 bps in annual fees.
Nationwide Dow Jones Risk-Managed Income ETF
Nationwide Dow Jones Risk-Managed Income ETF is an actively managed ETF targeting high current income and seeking to provide investors with a measure of downside protection in falling markets and potential for upside participation in rising markets. It employs a rules-based, options trading strategy that seeks to produce high income using the Dow Jones Industrial Average. It holds 33 stocks in its basket with each accounting for less than 10% share in the portfolio.
Nationwide Dow Jones Risk-Managed Income ETF has amassed $23.9 million in its asset base and trades in average daily volume of 12,000 shares. It charges 68 bps in fees per year from investors.
Leveraged Play: A Short-Term Win
Investors willing to take an extra risk could go for leveraged ETFs. These funds create a leveraged (2X or 3X) long position in the underlying index through the use of swaps, options, future contracts and other financial instruments. While these funds provide outsized returns in a short span, these could lead to huge losses compared to traditional funds in fluctuating or seesaw markets.
ProShares Ultra Dow30 ETF provides twice (2X) the return of the Dow Jones Industrial Average. It has AUM of $366.1 million and trades in a good volume of around 240,000 shares on average. The product charges 95 bps in annual fees (see: all the Leveraged Equity ETFs here).
ProShares UltraPro Dow30 also tracks the Dow Jones Industrial Average but offers three times (3X) exposure to the index. It has amassed $618.4 million in its asset base and trades in a solid average daily volume of 2.6 million shares. The expense ratio comes in at 0.95%.
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ETFs to Play Dow Jones' Solid Catch-Up
Amid the ongoing broad market rally driven by bets of the Fed nearing an end to its interest rate hike cycle, the Dow Jones Industrial Average is catching up pretty well, hitting its highest level in nearly two years. In fact, the blue-chip index has been outperforming over the past three months, rising 5.1% compared with a 3.6% gain for the broad market S&P 500 Index.
Investors seeking to tap the strength in the Dow Jones trend can consider SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , iShares Dow Jones U.S. ETF (IYY - Free Report) , Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) , First Trust Dow 30 Equal Weight ETF (EDOW - Free Report) , Nationwide Dow Jones Risk-Managed Income ETF , ProShares Ultra Dow30 ETF (DDM - Free Report) and ProShares UltraPro Dow30 (UDOW - Free Report) .
The S&P 500 is about 4% below its all-time high reached in January 2022, while the Dow is just 1.2% below its record. The outperformance came as the rally broadened out in recent weeks after the astounding surge of the “Magnificent Seven” stocks. Cyclical stocks, bank stocks and small-cap stocks have all shown an upward trend, indicating that the market is in a state of expansion, supporting the uptrend in equities (read: Magnificent Seven ETFs: A Review of 2023 & What Lies Ahead).
According to Bespoke, the Dow Jones has notched an all-time high on a total return basis, which includes dividend payments. The index is up 12% this year on a total return basis.
Being cyclical in nature, the blue-chip index outperforms when economic growth improves. Americans are now feeling more confident about the economy than they did over the past few months. This is especially true as consumer sentiment, as indicated by the preliminary reading on the University of Michigan preliminary index, rebounded sharply in early December and broke the streak of four consecutive months of decline (read: ETFs Set to Gain Amid Robust Holiday Consumer Sentiment).
Inflation is slowing, which will eventually lead to potential cuts to short-term interest rates by the Fed, leading to more growth on the way.
ETFs to Tap
SPDR Dow Jones Industrial Average ETF (DIA - Free Report)
SPDR Dow Jones Industrial Average ETF is one of the largest and most popular ETFs in the large-cap space, with AUM of $31.3 billion and an average daily volume of 3.6 million shares. It tracks the Dow Jones Industrial Average Index, holding 30 stocks in its basket with each making up for less than 10% share. Financials (20.3%), healthcare (19.6%), information technology (19.5%), industrials (14.6%) and consumer discretionary (13.2%) are the top five sectors.
SPDR Dow Jones Industrial Average ETF charges 16 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares Dow Jones U.S. ETF (IYY - Free Report)
iShares Dow Jones U.S. ETF tracks the Dow Jones U.S. Index, holding 1078 stocks in its basket, with none accounting for more than 6.6% of the assets. Information technology takes the largest share at 28.3%, while financials, healthcare and consumer discretionary round off the next spots with double-digit exposure each.
iShares Dow Jones U.S. ETF has amassed $1.7 billion in its asset base while trading in an average daily volume of 42,000 shares. It charges 20 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Dow Jones ETFs Hit New Yearly High: More Rally in the Cards?).
Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report)
Invesco Dow Jones Industrial Average Dividend ETF offers exposure to dividend-paying companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 28 stocks in its basket, with none accounting for more than 10.7% of the assets.
Invesco Dow Jones Industrial Average Dividend ETF has been able to manage assets worth $309.2 million while trading in a volume of 63,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
First Trust Dow 30 Equal Weight ETF (EDOW - Free Report)
First Trust Dow 30 Equal Weight ETF offers equal-weight exposure to all the 30 components of the Dow Jones Industrial Average by tracking the Dow Jones Industrial Average Equal Weight Index.
First Trust Dow 30 Equal Weight ETF has accumulated $258.5 million in its asset base and trades in average daily volume of 39,000 shares. It charges 50 bps in annual fees.
Nationwide Dow Jones Risk-Managed Income ETF
Nationwide Dow Jones Risk-Managed Income ETF is an actively managed ETF targeting high current income and seeking to provide investors with a measure of downside protection in falling markets and potential for upside participation in rising markets. It employs a rules-based, options trading strategy that seeks to produce high income using the Dow Jones Industrial Average. It holds 33 stocks in its basket with each accounting for less than 10% share in the portfolio.
Nationwide Dow Jones Risk-Managed Income ETF has amassed $23.9 million in its asset base and trades in average daily volume of 12,000 shares. It charges 68 bps in fees per year from investors.
Leveraged Play: A Short-Term Win
Investors willing to take an extra risk could go for leveraged ETFs. These funds create a leveraged (2X or 3X) long position in the underlying index through the use of swaps, options, future contracts and other financial instruments. While these funds provide outsized returns in a short span, these could lead to huge losses compared to traditional funds in fluctuating or seesaw markets.
ProShares Ultra Dow30 ETF (DDM - Free Report)
ProShares Ultra Dow30 ETF provides twice (2X) the return of the Dow Jones Industrial Average. It has AUM of $366.1 million and trades in a good volume of around 240,000 shares on average. The product charges 95 bps in annual fees (see: all the Leveraged Equity ETFs here).
ProShares UltraPro Dow30 (UDOW - Free Report)
ProShares UltraPro Dow30 also tracks the Dow Jones Industrial Average but offers three times (3X) exposure to the index. It has amassed $618.4 million in its asset base and trades in a solid average daily volume of 2.6 million shares. The expense ratio comes in at 0.95%.