The Struggling Dow Jones in 2025
By Dieter Kuckelkorn
Dow Jones' growth boosted by Trump's influence
The Dow Jones Industrial Average, known as the second-oldest stock index and often celebrated worldwide, is currently in a slump. Despite gaining approximately 12% since the year began, it lags behind the more significant U.S. benchmark, the S&P 500, which has surged an impressive 23%. Worryingly, the Dow has endured ten straight trading days of loss, making it the weakest performance since 1974.
Now, let's delve into the underlying factors that have impacted the Dow Jones since 1974:
Inflation and Monetary Policy
In the 1970s, the U.S. was hit by stagflation, with high inflation (peaking near 14% in 1980) eroding the real value of consumers' money and hurting corporate profits. The Federal Reserve's response — aggressive interest rate hikes to combat inflation — led to increased borrowing costs and a decrease in business investments and equity valuations. Although inflation has dropped to around 3.7% annually since 1974, similar tightening cycles in recent years have put pressure on the Dow Jones' growth-sensitive equities.
Geopolitical and Energy Crises
The 1973-1974 oil embargo caused a recession and stock market downturn, and similar energy price spikes (e.g., the Gulf War in 1990 or the 2008 crude oil surge) have historically negatively impacted the Dow. Recently, trade tensions, tariff threats, and import surges have been a cause for concern for the Dow, much like what was reported in April 2025 news headlines.
Structural Economic Shifts
Deindustrialization and globalization since the 1970s have significantly changed the Dow's traditional industrial base. As a result, the index has adopted a tech and healthcare focus, but this shift has also introduced volatility due to sector rotation and valuation disparities, such as tech bubbles in 2000 and 2022.
Financial Crises
Crises like the 2008 financial crisis and the 2020 COVID-19 crash have led to steep Dow declines, with recovery often dependent on fiscal stimulus and monetary easing. However, these actions can mask underlying economic fragility.
Global Pressures
Although the focus is on the Dow, global inflation, and economic dynamics affect multinational firms listed on the index. For instance, Mexico's average annual inflation since 1974 has averaged 22.31%, demonstrating interconnected risks such as currency fluctuations and emerging market instability.
Recent Dow weakness (as of April 2025) seems linked to GDP contraction and trade policy uncertainty, highlighting the index's sensitivity to macroeconomic sentiment. However, long-term inflation-adjusted returns show that the Dow has provided compounding growth despite these challenges, with $100 in 1974 being equivalent to around $648.68 in 2025 purchasing power.
- The struggling Dow Jones in 2025 is experiencing weakness, with its performance lagging behind the S&P 500, having endured ten straight trading days of loss.
- One of the factors responsible for the Dow's current slump is the tightening of monetary policy by the Federal Reserve, which has increased borrowing costs and decreased business investments and equity valuations.
- Geopolitical tensions and energy crises, such as trade tensions and import surges, have been a cause for concern for the Dow, much like what was reported in April 2025 news headlines.
- Despite the current weakness in the Dow Jones, long-term inflation-adjusted returns show that the Dow has provided compounding growth, with $100 in 1974 being equivalent to around $648.68 in 2025 purchasing power.
