Dow Faces Longest Losing Streak Since 2018 as Investors Brace for Fed's Decision

The Dow Jones Industrial Average, a barometer of the U.S. stock market, is facing a precarious moment as it enters a potential ninth consecutive day of losses, an occurrence that hasn't been seen since February 1978. Midday trading on Tuesday saw the index dip around 250 points, or 0.6%, raising concerns among investors and market analysts alike. This streak of losses, while concerning, has been relatively mild in magnitude, with the Dow losing only 3% over the past eight trading days. This marginal decline is hardly significant when viewed in the broader market context. Indeed, the majority of losses seem to be largely isolated to the Dow, as other indices such as the Nasdaq continue to thrive—fuelled by a robust performance in technology stocks, particularly in artificial intelligence. The Nasdaq saw an impressive surge of 1.2% on Monday, reaching record highs, while the S&P 500 also reported gains. Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services, described the current market dynamics as “quirky,” emphasizing the ongoing rotation of investment towards technology. "AI and technology remain the dominant theme in this market," he noted, highlighting the divergence of performance between sectors. A significant contributor to the Dow's recent struggles has been UnitedHealthcare Group, which has experienced an alarming 18% drop in value this month. The decline was exacerbated by the tragic fatal shooting of the company’s CEO, Brian Thompson, and compounded further by President-elect Donald Trump’s comments regarding reform in the drug industry. These events have led to increased volatility and uncertainty for the healthcare sector, which, in turn, affects the Dow. Looking ahead, the Dow's current losing streak—its longest since 2018—comes just before the Federal Reserve's upcoming interest rate decision. Investors are bracing for a likely quarter-point cut in rates, although there are murmurs that the Fed may indicate a deceleration in future cuts as 2025 approaches. While the Dow faces these challenges, it is worth noting that it remains up by 16% so far this year and stands approximately 1,500 points (or 3.5%) higher than it was on Election Day, a time when markets rallied in response to the political landscape. The initial post-election surge can be attributed to optimism surrounding Trump's promises of deregulation and tax cuts, with investors momentarily relieved by the avoidance of contentious recounts and court disputes. However, experts warn that as the market looks to the future, it will need to grapple with both the positive and negative aspects of the Trump administration's policies. Lerner cautioned that next year will require investors to consider the full scope of Trump’s agenda, including potential impacts from proposed tariff hikes and immigration policies. Despite the current losing streak, Anthony Saglimbene, chief market strategist at Ameriprise, maintains a measured outlook, suggesting these losses may simply reflect profit-taking following substantial gains in recent weeks. He remarked on the need for a "modest reset in expectations regarding the risks and opportunities associated with the incoming Trump administration," indicating that the market is adjusting to the reality of what a "Trump 2.0" policy agenda could entail. As the Dow navigates this challenging environment, eyes will be on the Federal Reserve and how its decisions might shape the market landscape in the coming months. Investors remain cautious yet hopeful, weighing the potential for recovery against the backdrop of evolving political and economic conditions.