Dow Jones Industrial Average is one of the oldest indices in the world. It is made up of 30 of the largest firms in the United States. While the index is closely followed, it does not always give a clear picture of the economy. In addition, the companies that make the index are so large that they derive most of their income abroad.
Year to date, the index has been little changed, moving up by just 0.62%. This has happened because of the increased volatility in the market, caused mostly by Trump’s policies on trade.
Last week, he signed new tariffs that will target aluminum and steel imports. Other countries have vowed to retaliate. In case this happens, companies in the Dow would be greatly affected. For example, a company like Boeing would be the most affected since most of its sales come from China. China has indicated that it would direct its companies to dump Boeing and instead move to Airbus.
In the one-year chart below, it is clear that the Dow is in consolidation mode which has caused the price to be at the same level with the short and long-term Exponential Moving Averages. As the trade war rumors continue, the index may fall to $23259 level.