Dow Jones & Nasdaq 100 Outlook:
- The Dow Jones[1] and Nasdaq[2] enjoyed modest gains despite uncertainty
- Even if a larger rebound materializes, the financial, airline and energy sectors may remain a concern
- Consequently, traders and investors will await a fiscal response from the Trump administration
Dow Jones & Nasdaq 100 Forecast: Airlines, Banks and Shale at Risk
After suffering their worst day in 12 years,[3] stocks attempted to recover on Tuesday but gains appear tenuous for the time being. Unsurprisingly, it seems investors are hesitant to fully commit to equity exposure given the highly uncertain and volatile market climate. In turn, market participants may wait for clarification from the ECB and the Trump administration which is reportedly considering a range of fiscal measures.
Financials, Airlines and Shale Sectors Take a Hit
Chart created in TradingView[4]. Financials in blue, airlines in orange, equally-weighted shale index in red
In the meantime, airliners, banks and the shale industry will likely be among some of the most vulnerable sectors. In the case of airlines, an acute drawdown in international travel has seen some of the country’s largest airlines reduce flights and connections in an effort to cut costs. Nevertheless, the XAL Airline ETF has been battered in the recent rout. In response, the Trump administration has announced plans to investigate aid measures for airliners.[5]
Financials May Flounder
Similarly, lower interest rates and slow economic growth will look to weigh on the XLF Financials ETF. While banks can look to offset lower rates with higher volume, slower growth may weigh on demand and prove troublesome – a theme outlined by the performance of European financials which have had to grapple with low rates and tepid Eurozone growth for years.
