How To Play Dow's Best-Ever Gains With ETFs
Zacks Investment Research | Dec 27, 2018 01:00AM ET
On Dec 26, the Dow Jones Industrial Average registered its best one-day point gain in history. The Dow added about 1,086.25 points on that day, marking 4.98% gains. The gauge now sits at 22, 878.45. This year has been extremely volatile for the index with 7.84% loss.
Let’s see what drove the Boxing Day gain.
Oil’s Recent Gains
Oil ETFs United States Oil (NYSE:USO) VDE ) added about 6.4%.
It has been noticed lately that Dow Jones shares a deep relationship with oil price movement. Though the latest energy sector rally has spread optimism in the broader market as a whole, in most cases, on a particular day of oil surge, the spurt in the Dow Jones is steeper than that of the S&P 500, or vice versa (read: Oil Sees Strong Start to 2018 in 4 Years: ETFs to Play ).
Rally Retail Shares
There was a superb rally in retail shares as holiday shopping season has emergedas the best in six years. Total U.S. retail sales, excluding automobiles, rose 5.1% year over year between Nov 1 and Dec 24, Holiday Sales Strongest in Six Years: ETFs Set to Surge ).
Cheaper Valuation
Since the start of the fourth quarter, Wall Street has been on a tumultuous ride. Renewed global growth worries, no definite solution to U.S.-China trade tensions, constant volatility in the oil patch and a flattening yield curve in the United States which invoked recessionary fears at times weighed on the market (read: Not Sure About 2018 Santa Rally? Buy 5 Low P/E Momentum ETFs ).
Amid such market doldrums, Dow Jones suffered its worst week since the global financial crisis of 2008, tumbling about 6.9% in the Dec 17-21 timeframe. So, many investors decided to dig into the weaker valuation.
ETFs in Focus
Though we are not sure how long the rally will continue, investors intending a momentum play, can bet on DIA, Invesco Dow Jones Industrial Average Dividend ETF (IYY ) (up 5.03%).
Investors can also settle for leveraged Dow ETF plays as long as the trend favors them. Here, ProShares Ultra Dow30 (DDM) (up 9.7% on Dec 26) and ProShares UltraPro Dow30 (UDOW) (up 14.4% on Dec 26)are a couple of choices.
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