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The Zacks Analyst Blog Highlights SPDR Dow Jones Industrial Average ETF, First Trust Dow 30 Equal Weight ETF, Invesco Dow Jones Industrial Average Dividend ETF, ProShares Ultra Dow30 ETF and ProShares UltraPro Dow30
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For Immediate Release
Chicago, IL – December 19, 2023 – Zacks.com announces the list of stocks and ETFs featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include: SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , First Trust Dow 30 Equal Weight ETF (EDOW - Free Report) , Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) , ProShares Ultra Dow30 ETF (DDM - Free Report) and ProShares UltraPro Dow30 (UDOW - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Dow Jones ETFs at or Near Record Highs: More Rally to Come in 2024?
Among the three key U.S. equity gauges, the Dow Jones won in 2022 only to lag the S&P 500 and the Nasdaq in the first half of 2023. However, the blue-chip index rebounded in the second half of this year as it has gained 9.6% in the past six months (as of Dec 15, 2023) compared with 7.8% gains in the S&P 500 and 6% uptick in the Nasdaq.
Last week, the Dow Jones Industrial Average attained a historic landmark, reaching a record high, thanks to the Federal Reserve's dovish stance and tone. Investors seeking to tap the winning Dow Jones trend can consider SPDR Dow Jones Industrial Average ETF, First Trust Dow 30 Equal Weight ETF and Invesco Dow Jones Industrial Average Dividend ETF. Investors who want a leveraged exposure may bet on ProShares Ultra Dow30 ETF and ProShares UltraPro Dow30.
Let’s delve a little deeper.
Market Projections
Some analysts believe that the economy's strength and the Federal Reserve's dovish tone as key factors in the market's positive trend. Thus, the further strength in the Dow Jones is anticipated, reflecting a shift from focusing on potential risks to recognizing positive developments.
Revised Rate Cut Expectations
After raising the policy rate by 5.25 percentage points since March 2022 – in one of the Fed’s fastest and biggest rate hike campaigns – it has now held the rate steady since July on cooling inflation. Now, in contrast to earlier projections of a 0.50% rate cut, the Fed now anticipates a series of three 25-basis-point rate cuts in 2024.
The central bank foresees the peak of the fed funds rate at 4.6% in 2024, down from the previous projection of 5.1%, indicating a 0.75% rate cut in the upcoming year. The federal funds rate is expected to be falling to 3.6% – indicating four quarter-point cuts – by 2025. No Fed officials see rates higher by the end of next year.
Inflation and Economic Growth Projections
The Summary of Economic Projections (SEP) revealed the Fed's core inflation outlook, expecting it to peak at 2.4% next year, lower than the previous 2.6% projection. The Federal Reserve expects a further decline in inflation to 2.2% by 2025.
Notably, the core Personal Consumption Expenditures Index, the Fed's preferred inflation measure, showed a reading of 3.5% for October, down from 3.7% in September and 4.3% in June. The Fed’s target for this index is 2%.
The Fed forecasts economic growth for 2023 to hit 2.6%, considerably higher than its September projections of 2.1% growth. For 2024, GDP growth is expected to be 1.4%, slightly lower than 1.5% forecast in September. GDP growth data for 2025 is kept constant at 1.8%.
Steepening Yield Curve in the Cards?
As recessionary fears are ebbing, inflation has been falling and the Fed is likely to cut rates from 2024, a steepening of the yield curve is expected next year. A steepening yield curve is great for bank stocks as the pattern boosts banks’ net interest rate margins. Since Financials take about 20.7% of the Dow Jones’ portfolio, the scenario is a key plus for the Dow Jones.
Information Technology Rally to Continue in 2024
Buoyed by steadily decreasing inflation and a simultaneous reduction in the magnitude and number of interest rate hikes by the Fed, the technology sector has witnessed an astonishing rally in 2023. This happened, tech stocks outperform in a low-rate environment. Despite its higher valuation, the tech rally is likely to gather more pace in 2024 due to low rates.
A lower interest rate will decrease the discount rate, which in turn will raise the net present value of investment. Moreover, many of these companies rely on credit from chip sources to fuel their growth.
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 from the second half.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights SPDR Dow Jones Industrial Average ETF, First Trust Dow 30 Equal Weight ETF, Invesco Dow Jones Industrial Average Dividend ETF, ProShares Ultra Dow30 ETF and ProShares UltraPro Dow30
For Immediate Release
Chicago, IL – December 19, 2023 – Zacks.com announces the list of stocks and ETFs featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include: SPDR Dow Jones Industrial Average ETF (DIA - Free Report) , First Trust Dow 30 Equal Weight ETF (EDOW - Free Report) , Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) , ProShares Ultra Dow30 ETF (DDM - Free Report) and ProShares UltraPro Dow30 (UDOW - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Dow Jones ETFs at or Near Record Highs: More Rally to Come in 2024?
Among the three key U.S. equity gauges, the Dow Jones won in 2022 only to lag the S&P 500 and the Nasdaq in the first half of 2023. However, the blue-chip index rebounded in the second half of this year as it has gained 9.6% in the past six months (as of Dec 15, 2023) compared with 7.8% gains in the S&P 500 and 6% uptick in the Nasdaq.
Last week, the Dow Jones Industrial Average attained a historic landmark, reaching a record high, thanks to the Federal Reserve's dovish stance and tone. Investors seeking to tap the winning Dow Jones trend can consider SPDR Dow Jones Industrial Average ETF, First Trust Dow 30 Equal Weight ETF and Invesco Dow Jones Industrial Average Dividend ETF. Investors who want a leveraged exposure may bet on ProShares Ultra Dow30 ETF and ProShares UltraPro Dow30.
Let’s delve a little deeper.
Market Projections
Some analysts believe that the economy's strength and the Federal Reserve's dovish tone as key factors in the market's positive trend. Thus, the further strength in the Dow Jones is anticipated, reflecting a shift from focusing on potential risks to recognizing positive developments.
Revised Rate Cut Expectations
After raising the policy rate by 5.25 percentage points since March 2022 – in one of the Fed’s fastest and biggest rate hike campaigns – it has now held the rate steady since July on cooling inflation. Now, in contrast to earlier projections of a 0.50% rate cut, the Fed now anticipates a series of three 25-basis-point rate cuts in 2024.
The central bank foresees the peak of the fed funds rate at 4.6% in 2024, down from the previous projection of 5.1%, indicating a 0.75% rate cut in the upcoming year. The federal funds rate is expected to be falling to 3.6% – indicating four quarter-point cuts – by 2025. No Fed officials see rates higher by the end of next year.
Inflation and Economic Growth Projections
The Summary of Economic Projections (SEP) revealed the Fed's core inflation outlook, expecting it to peak at 2.4% next year, lower than the previous 2.6% projection. The Federal Reserve expects a further decline in inflation to 2.2% by 2025.
Notably, the core Personal Consumption Expenditures Index, the Fed's preferred inflation measure, showed a reading of 3.5% for October, down from 3.7% in September and 4.3% in June. The Fed’s target for this index is 2%.
The Fed forecasts economic growth for 2023 to hit 2.6%, considerably higher than its September projections of 2.1% growth. For 2024, GDP growth is expected to be 1.4%, slightly lower than 1.5% forecast in September. GDP growth data for 2025 is kept constant at 1.8%.
Steepening Yield Curve in the Cards?
As recessionary fears are ebbing, inflation has been falling and the Fed is likely to cut rates from 2024, a steepening of the yield curve is expected next year. A steepening yield curve is great for bank stocks as the pattern boosts banks’ net interest rate margins. Since Financials take about 20.7% of the Dow Jones’ portfolio, the scenario is a key plus for the Dow Jones.
Information Technology Rally to Continue in 2024
Buoyed by steadily decreasing inflation and a simultaneous reduction in the magnitude and number of interest rate hikes by the Fed, the technology sector has witnessed an astonishing rally in 2023. This happened, tech stocks outperform in a low-rate environment. Despite its higher valuation, the tech rally is likely to gather more pace in 2024 due to low rates.
A lower interest rate will decrease the discount rate, which in turn will raise the net present value of investment. Moreover, many of these companies rely on credit from chip sources to fuel their growth.
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 from the second half.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.