Unsure about this market? You’re not alone. It’s been a volatile year, full of geopolitical and inflationary risk not only in the United States but around the world. Investors looking past growth stocks shaken by rising rates and fears of a recession may want to consider the Dow Jones Industrials Average (DJI) for earnings season.
Earnings over the last two weeks had been expected to point investors in a clear direction, but instead have provided a mini rally. While it remains to be seen whether earnings have lagged the Fed’s actions or that much of the bad news has already been priced in, the big indexes have chugged along, with the Dow leading the way. Looking to the Dow for earnings season may have merit, with the Dow only down about -10% over one year based on normalized performance, compared to the S&P at -15% and the Nasdaq at -24%.
Whereas the S&P 500’s growth stocks require patience, now could be the time for the Dow for investors to park their cash, trusting the steady underlying industrials, possibly boosted by infrastructure spending, as a relatively safe option. The Dow is up more than 7% over the last month, 3% more than the S&P which continues to be held back by the likes of Align Technology Inc., (ALGN), Stanley Black & Decker (SWK), and Carnival Corporation (CCL).
That said, the Dow’s price-weighted approach may play a role in its recent durability. It may not offer the perfect read of the broader market, but in a scenario in which the broader market is riven by seriously contrasting trends, the reliable Dow and its limited list of blue chips can be a strong position to watch the next few key weeks unfold and move from there.
So keep an eye out for that next big single stock or growth offering that looks ready to burst, but until then, investors may want to consider ETFs focused on the Dow for earnings season.
One ETF that not only provides exposures to a portfolio of stocks in the Dow Jones Industrials Average but also some current income is the Nationwide Dow Jones Risk-Managed Income ETF (NDJI). NDJI is actively managed, looking to generate high current income from dividends and a call-put option collar strategy.
For more news, information, and strategy, visit the Retirement Income Channel.