Dow Jones ETF DIA Outperforms in January: Here's Why

The Dow Jones-based exchange-traded fund (ETF) SPDR Dow Jones Industrial Average ETF Trust DIA has gained about 6% in January (as of Jan. 30, 2025). In comparison, the S&P 500 advanced 3.5% in January, and the Nasdaq Composite added 2.1%.Let’s find out what drove the rally in the Dow Jones.Less Tech Exposure Technology Select Sector SPDR Fund XLK added only 0.1% in January (as of Jan. 30, 2025) due to the DeepSeek rout and growing worries over the profitability of Big Tech’s big AI investments. DeepSeek, a Chinese startup developing AI models, grabbed headlines with the release of its new R1 model in late January. According to Yahoo Finance, the company revealed that training the R1 model cost just $5.6 million, significantly less compared to the $100 million required to train OpenAI's GPT-4 model.This raises important questions about AI investment and the potential rise of more cost-efficient artificial intelligence agents, which could disrupt the current market dynamics (read: Will 2025 See Slowing AI Investments in Big Tech? ETFs in Focus).The Dow Jones focuses about 20% on the Information Technology sector while the S&P 500 has about 30% focus on the tech sector and the Nasdaq has about 60% exposure to it. As a result, during the tech rout of January, the Dow Jones was less hit. Upbeat Big Bank Earnings Financial Select Sector SPDR Fund XLF added about 7.4% in January. An improved interest rate outlook and upbeat big bank earnings helped the space surge. The Dow Jones puts the highest exposure to this sector and, as a result, benefited the most. Note that the Dow Jones’ largest holding — Goldman Sachs GS shares — jumped about 12% in January.Trump 2.0 in 2025The year 2025 is likely to bring many surprises in the form of the Trump 2.0 era, its impact on global trade and inflation, and the resultant Fed moves. If Trump’s protectionist agenda and tariff war drive up domestic inflation, we may see hawkishness in the Fed’s ongoing dovish stance. The rate cuts in 2025 may be lower in terms of both frequency and magnitude.A less-dovish Fed and a high-rate environment will likely be more detrimental to the high-growth tech stocks than value-centric financials stocks. And since the Dow Jones has a better value quotient than the S&P 500 and the Nasdaq, the former could fare better in the initial months of 2025.Wall of Worry for the Dow JonesThe future of one of the largest Dow Jones components — UNH — is uncertain in the Trump era. Although the health insurance companies’ shares gained 8% in January, Trump said, “We're going to knock out the middleman.” This very comment and some related government stances may go against the UNH stock anytime soon.The Dow Jones’ largest exposure is in financial stocks. If the geopolitical risks rise in the Trump 2.0 era due to the tariff war, we may see a subdued increase in long-term U.S. treasury bond yields, resulting in the flattening of the yield curve. Financials underperform in such a scenario.Bottom LineSo, overall, the Dow Jones’ performance should be moderate-to-upbeat in 2025, if not great. Investors can keep a close tab on the DIA ETF. The current period of high interest rates is proving more favorable for the Dow Jones than for the S&P 500 and the Nasdaq.Holding 30 blue-chip stocks, the fund DIA is widely spread across components, with each having less than an 8.77% share. Financials (24.8%), information technology (19.9%), healthcare (14.7%), consumer discretionary (13.98%), and industrials (12.9%) are the top five sectors.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report Financial Select Sector SPDR ETF (XLF): ETF Research Reports Technology Select Sector SPDR ETF (XLK): ETF Research Reports SPDR Dow Jones Industrial Average ETF (DIA): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks