The Dow Jones Industrial Average has declined for nine straight days, its longest losing streak since February 1978. The decline has been led by UnitedHealth, which has fallen 20% this month, and other cyclical stocks such as Sherwin-Williams and Caterpillar, which have dropped 5% or more. The sell-off is not a cause for major concern, with many investors shrugging it off as a quirk of the price-weighted average, which has a narrow focus on 30 stocks and does not capture the gains of megacap stocks.
The Dow is often seen as a proxy for overall economic conditions, but the extended sell-off does not necessarily reflect a weaker economy. The more diversified S&P 500 and Nasdaq Composite, which are up 0.4% and 1.4% respectively this year, suggest that the decline is likely temporary and may be due to oversold conditions. The Federal Reserve’s decision this week may also be a catalyst for a rebound.
Experts believe that the decline is a buying opportunity, with oversold conditions and a likely reversal higher to close out 2024. The Dow’s current decline is not a reflection of the broader market, which is still thriving and shows no signs of entering a stagflationary period like the late 1970s.