The Dow Jones Industrial Average (DJIA) is one of the most widely followed stock indices in the world. It provides a snapshot of the American market, providing insight into the state of the economy and sentiment of US investors. Recently, the DJIA has been on a roller coaster ride, as investors have looked for signs of stability and positive developments amid the pandemic.
However, behind the headlines, investors are presented with four unsettling charts in the DJIA. These charts represent sectors of the economy that have been hit hard by the pandemic and are still struggling to find their footing. Here, we take a closer look at these charts, and how they could influence the future of the DJIA and the markets.
The first chart on the list is the S&P 500 industries chart. This chart provides a breakdown of the composition of the S&P 500 index and how it relates to the other sectors in the DJIA. In the short-term, the most significant losses come from the Consumer Discretionary (24.1%) and Information Technology (32.7%) sectors, representing almost half of the market. This is a worrying sign, as these sectors are likely to suffer the most as the pandemic continues to impact spending power and disrupt traditional businesses.
The second chart shows the softness in developed economy indices. This chart focuses on developed countries such as the United States, the Eurozone, and Japan. These countries, along with their respective indices, have been subject to sharp declines during the pandemic, as consumer confidence and market sentiment have taken a significant hit. As these indices have fallen, the DJIA has faced downward pressure and is likely to continue doing so until the situation improves.
The third chart shows that commodities have been hit hard by the pandemic, with most tend to have dropped significantly since the start of the year. Furthermore, energy and metal commodities have plummeted, causing serious worries for investors and the markets. Commodities play a key role in international trade and production and are a dependable indicator of economic health. It’s not surprising, then, that the negative effect this chart has had on the DJIA is still being felt today.
Lastly, the fourth chart reveals the impact the pandemic has had on long-term interest rates. As the Fed has sought to prop up the economy, long-term interest rates have steadily declined. This has dampened investor sentiment, as stocks have become less attractive and more risky compared to low-risk investments such as government bonds or cash deposits. Again, this puts more downward pressure on the DJIA as investors look for more stable investments.
Overall, the four charts detailed above paints an unsettling picture of the current state of the economy and the markets. They demonstrate the staggering impact the pandemic has had, and how sectors such as consumer discretionary, technology, commodities, and long-term rates have all taken a hit. As the world recovers, it is likely that the DJIA will continue to face downward pressure, and investors will need to remain patient and savvy before they can see positive changes and returns.
