The Dow Jones Industrial Average managed to pull off a 13th day in the green on Wednesday — it’s longest winning streak since Jan. 20, 1987.
There’s no question that the Dow’s latest milestone is one for the history books. One more day in the green and the blue-chip gauge will be able to claim its longest winning streak in more than 125 years.
It’s a notable reversal of fortune for a U.S. equity index that has lagged its peers all year.
But what does the Dow’s performance so far tell us about how stocks’ might perform over the next year? Generally speaking, the index was higher one year later after rising for 12 days or more, according to Dow Jones Market Data. Meanwhile, the index was higher three months after each 12-day streak of gains.
Unfortunately the sample size here is pretty limited: there have only been five such streaks, including the current one, since the late 19th Century.
DOW JONES MARKET DATA
And although the blue-chip gauge has been on average 9.4% higher one year later after such a protracted winning streak, there has been at least one notable exception: The Black Monday market crash, which saw the Dow drop more than 22% in a single day, occurred nine months after a 13-day Dow winning streak ended in January 1987. One year later, the index was down 10.7%.
What’s more, the Dow narrowly missed another 12-day streak during the month of July 1929, when it climbed for 11 days through July 8, 1929 (this was back when the New York Stock Exchange still offered U.S. stock trading on Saturdays), according to DJMD. Three months afterward, the stock market collapsed, ushering in the start of the Great Depression.
That the Dow recorded outsize winning streaks in 1929 and 1987 means there’s “something for everyone if you want to play the analogy game,” said Jonathan Krinsky, chief technical strategist at BTIG, in a Wednesday research note.
It’s also notable that none of the 12- or 13-day streaks, when they ended, marked the end of the rally. Of course, 1929 and 1987 did see historic crashes later in the year, Krinsky added.
Looking at the Dow performance compared with the start of recession leaves investors with a similar takeaway. While the blue-chip gauge’s gains have usually occurred during periods of economic strength, they haven’t always.
Since 1950, there have been 25 Dow winning streaks of at least 9 days, excluding the current one, according to data compiled by eToro’s U.S. equity strategist Callie Cox. Only three of those occurred either during a recession, or the year before one would begin.
What’s more, a 12-day winning streak that concluded on Dec. 7, 1970 occurred just as a recession was ending, according to data from the National Bureau of Economic Research, the official arbiter of what constitutes a recession in the U.S.
Of course, past performance is no indicator of future success. Federal Reserve Chairman Jerome Powell said that he doesn’t expect inflation to retreat back to the central bank’s 2% until 2025 during a Wednesday press conference, after the central bank hiked its benchmark policy rate by 25 basis points.
“The Fed is still determined to get inflation back down to 2%, and that could mean that rates stay around these levels until something breaks,” Cox said in emailed commentary.
Despite it’s historic spate of gains, the Dow has continued to lag other major U.S. equity indexes.
Perhaps the biggest issue facing the blue-chip gauge, as opposed to the S&P 500 index and Nasdaq Composite, is that the Dow isn’t nearly as heavily weighted toward the so-called Big Seven U.S. technology giants that have powered much of this year’s stock-market rally, even prompting the Nasdaq Exchange to reduce their weightings in the Nasdaq 100 to combat overconcentration risks after their market capitalization ballooned thanks to the artificial-intelligence craze.
Of the Big Seven — a term that refers to Microsoft Corp. MSFT, -3.76%, Apple Inc. AAPL, +0.45%, Alphabet Inc. (both Class A GOOGL, +5.78% and Class C GOOG, +5.59% shares), Nvidia Corp. NVDA, -0.50%, Amazon.com Inc. AMZN, -0.76%, Tesla Inc. TSLA, -0.35% and Meta Platforms Inc. META, +1.39% — only Microsoft and Apple are Dow constituents. And because the Dow is weighted by share price, insurance giant UnitedHealth Group Inc. UNH, -0.57% has more influence than Apple and Microsoft do.
But the blue-chip gauge’s gains over the past three weeks have narrowed the gap. Before the streak began, the blue-chip was sporting a year-to-date gain of less than 2%. As of Tuesday’s close, the blue-chip gauge was up 7% in 2023, and has recently smashed through a series of 52-week highs, according to FactSet data.
Of course, the Dow is still trailing the S&P 500 SPX, -0.02% and Nasdaq Composite COMP, -0.12% in 2023 by a hefty margin, with the S&P 500 up 18.6% and the Nasdaq Composite’s gain of 34.3%.
The Dow gained 82.05 points, or 0.2%, to 35,520.12 on Wednesday. Meanwhile, the Nasdaq Composite COMP, -0.12% shed 17.27 points, or 0.1%, to 14,127.28, while the S&P 500 SPX, -0.02% finished lower by less than one point.
