November 10, 2026

Is the Dow Jones Industrial Average (DJIA) a Buy Now? | While the S&P 500 is Down -5.7% in a Month, the Dow is Down -0.5%, Masking a 1,812-Point Drag from Caterpillar Alone …

This article provides a Japanese-language analysis of the Dow Jones Industrial Average’s published values, the holdings of the DIA (Dow-linked ETF), analyst forecasts for the 30 constituent companies, Federal Reserve statements, and earnings call transcripts. We consider whether one should buy the “index itself” rather than individual stocks.

On November 5, the Dow fell 1,833 points (-3.4%) to 51,523.06. Having just gained +3.0% on the previous day, November 4, it effectively wiped out that gain in a single day. The semiconductor index, the SOX, fell approximately 12% on the same day.

Even so, the Dow closed at 51,285.73 on November 6, down only -0.5% from a month ago (October 6). In that same month, the S&P 500 fell -5.7% and the SOX fell -29.0%.

However, looking under the hood, it is not quiet. Caterpillar’s stock price alone fell -35.3% in one month, dragging the index down by 1,812 points. If Caterpillar’s price had remained unchanged, the Dow would have been up +3.1% over the same month.

The Dow is an index where companies with higher stock prices move the index more significantly. Behind the numbers that appear resilient to declines, the sharp drop of one company and the gains of the remaining companies are canceling each other out

・The Dow’s forward P/E ratio is estimated by the author to be 17.8x. Although this figure is close to the S&P 500’s 12-month forward P/E of 17.7x, the target periods and calculation methods differ, so one cannot compare them for undervaluation or overvaluation based on this alone

・38.5% of the projected earnings growth for the next period is accounted for by three companies: Merck, Boeing, and NVIDIA. Excluding these three, the growth rate is +6.3%

・The 10-year Treasury yield is 4.86%, and the Fed raised rates in September. The spread with the expected earnings yield is 0.77 percentage points

・Stock prices are within the range of the base scenario, and it cannot be definitively said that they are undervalued

・Therefore, this is not a time to buy in a lump sum, but rather a time to continue dollar-cost averaging while pre-determining the levels at which to buy if prices fall

Three-line summary

・The index is +6.7% year-to-date and -5.6% from its high(as of the November 6, 2026 close) ── The high was 54,349.12 on August 5; unlike the S&P 500, which hit a new high in October, the Dow has not been able to exceed its three-month high

・The forward P/E ratio is 17.8x, and the projected earnings growth rate for the next period is +10.0%(author’s estimate) ── 38.5% of the earnings growth amount comes from Merck, Boeing, and NVIDIA; excluding these three, it is +6.3%

・In earnings call comments, 10 out of 30 companies mentioned crude oil/fuel, a rate of 33%── A year ago, for the same companies, it was 2 companies (7%). Mentions of tariffs dropped from 57% to 33%

What is the Dow Jones Industrial Average and how do you buy it?

In short, it is an index calculated by adding up the “stock prices” of 30 representative US companies and dividing by a number called the divisor. Unlike the S&P 500, which is weighted by market capitalization, the ratio is determined by the height of the stock price itself. The size of the company does not matter.

Therefore, the order of the ratios is the same as the order of the stock prices. At the November 6 close, Goldman Sachs’ stock price of $865.82 accounted for 10.0% of the sum of the 30 companies’ stock prices, the largest ratio in the index. This is about 22 times Nike’s stock price of $38.59. If Goldman Sachs moves 1%, the index moves about 51 points, whereas if Nike moves 1%, it only moves about 2.3 points. Converted using the current divisor, for any company, a $1 move in stock price moves the index by about 5.94 points.

In descending order of stock price, Goldman Sachs is 10.0%, Caterpillar 6.5%, Microsoft 6.1%, Amgen 5.3%, and Visa 4.9%, with the top five companies accounting for 32.9%. On the other hand, the giant tech companies that make up a large portion of the S&P 500—Microsoft, Apple, NVIDIA, Alphabet, and Amazon—together account for only 18.6% of the Dow. NVIDIA is only 2.2%.

As for how to buy it, the DIA (expense ratio 0.16%) is the representative ETF listed in the US. There are also investment trusts available domestically that track the Dow.

When investing in yen, the impact of exchange rates cannot be overlooked. The 5-year return of the Dow Jones Industrial Average is +41.2%, but because the dollar moved from 113.8 yen to 157.5 yen (+38.4%) during the same period, the yen-denominated return is approximately +95% (excluding dividends). The yen-denominated performance to date includes a significant tailwind from the weak yen.

Point 1: Strong in the long term, but outperformed by the S&P 500 over 10 years

The Dow Jones Industrial Average rose +186.7% over 10 years. Including dividends for the DIA, it is +247.2%. Counting from every day since the DIA was listed in 1998, the percentage of 1-year holding periods that resulted in a gain is 79.8%, and for 10-year holding periods, it is 97.8%. For 15-year holding periods, every starting point resulted in a gain. However, this is an aggregate of overlapping periods using each past business day as an investment start date. It does not indicate the success rate of independent investment cases or the probability of future gains. Furthermore, the 10-year holding results are limited to those who started by November 2016, and 15-year holding results are limited to those who started by November 2011.

However, over the same 10 years, the S&P 500 rose +253.8%, and the SPY including dividends rose +312.9%. Because the Dow is limited to 30 companies based on price-weighting, it has not fully captured the rise of giant tech companies. In the 33 years since 1993, the Dow’s annual return has outperformed the S&P 500 in 15 of those years.

It is not resistant to declines either. Since 1992, there have been 12 instances where it fell more than 10% from its closing high, and 4 instances where it fell more than 20%. Most recently, it fell -16.4% in 2025, -21.9% in 2022, -37.1% in 2020, and -53.8% between 2007 and 2009. This year’s largest decline was -10.0% from February 10 to March 27.

The current decline of -5.6% from the high is almost the same as the S&P 500’s -5.7%. However, the timing of the highs is different. The S&P 500 continued to hit new highs until October 6, while the Dow’s high was on August 5. I believe the reason it was resistant to this month’s decline is partly because its previous rise was smaller.

Point 2: High-priced companies move the index

The price movement over the past month clearly illustrates the mechanism of a price-weighted index. Caterpillar fell -35.3% from $863.44 on October 6 to $558.63, dragging the index down by 1,812 points on its own. Since the total decline of the index was 236 points, the impact of Caterpillar alone is more than seven times the decline of the entire index.

Caterpillar fell -9.3% on the day of its earnings announcement on October 29. In the earnings call, it explained that the order backlog was $78 billion (approximately 12.324 trillion yen), an increase of approximately $38 billion (+96%) from the same period last year, and that the power generation business grew by +75%. While the earnings figures were strong, the stock price continued to fall after the announcement. Reports cite the movement of funds away from power infrastructure-related stocks and anxiety over AI investment after the midterm elections as the background.

Conversely, the stocks that pushed the index up were Amgen (+14.4%, 344 points), Home Depot (+19.8%, 337 points), Visa (+14.0%, 309 points), McDonald’s (+19.0%, 262 points), and Travelers (+9.6%, 205 points). The rise in sectors far from AI almost offset the declines in Caterpillar, Alphabet (-18.1%, 374 points), and NVIDIA (-22.0%, 313 points).

The sector composition is also significantly different from the S&P 500. Looking at the price ratio, the Dow has 27.1% in financials, which is more than double the S&P 500’s 12.8%. Information technology is 18.7%, almost half of the S&P 500’s 35.5%. Healthcare is 14.8% and industrials are 13.2%, both of which are larger proportions than in the S&P 500. There are no utility or real estate companies included. Holding the Dow means having a portfolio of large US companies with a higher proportion of financial and economically sensitive companies.

Point 3: Next-year expected P/E ratio is 17.8x, but less than 40% of the earnings growth comes from 3 companies

Since the Dow is an index that adds up stock prices, the P/E ratio is calculated in the same way. The sum of the stock prices of the 30 companies is divided by the sum of the earnings per share of the 30 companies (the divisor cancels out in the numerator and denominator). Using analyst earnings per share forecasts (author’s estimate), the actual P/E is 20.0x, the current fiscal year forecast is 19.5x, and the next fiscal year forecast is 17.8x. The expected P/E for the S&P 500 for the next 12 months collected by FactSet was 17.7x as of November 5. Although the numbers are close, the “next fiscal year” in my estimate is the next fiscal year divided by each company’s accounting year, while FactSet covers the next 12 months, and the forecasts and calculation methods used are different. Caution is required when making simple comparisons of cheapness or expensiveness.

For reference, the expected P/E (FY1, the company’s standard using the expected earnings per share for one year ahead) published by State Street, which manages the DIA, is 18.62x as of November 6. This also does not match any of the figures in my estimate because the way the forecasts are taken is different.

The earnings growth rate for the next fiscal year is +10.0%. However, there are special factors in the content. The proportions of the earnings growth are 15.0% for NVIDIA, 14.1% for Merck, 11.6% for Caterpillar, and 9.5% each for Boeing and Microsoft, with these five companies accounting for 59.6%.

Merck’s earnings per share for the current fiscal year have fallen significantly due to temporary expenses associated with acquisitions, and the forecast for the next fiscal year is 3.2 times that. In the earnings call, it positioned 2027 as an “investment year” and indicated that sales are expected to grow only slightly. Boeing is expected to turn from a loss this fiscal year to a profit next fiscal year, but it is taking longer than expected to stabilize 737 production at 47 aircraft per month, and 52 aircraft is the target for the second half of 2027. Merck, Boeing, and NVIDIA together account for 38.5% of the earnings growth, and the growth rate for the 27 companies excluding these three is +6.3%.

Conversely, Travelers’ earnings forecast for the next fiscal year is 15.5% lower than the current year, dragging down the total earnings growth amount by 12.9%. In its earnings call, the company explained that the rate of insurance premium adjustments at contract renewal was 4.1%, indicating that the rise in premiums has begun to stabilize.

Another example is Goldman Sachs, which accounts for 10.0% of the stock price weighting but represents 15.3% of the next fiscal year’s projected earnings. Its forward P/E ratio is 11.7x, which, along with NVIDIA, is the lowest level among the 30 companies. High-priced financial stocks are effectively dragging down the index’s P/E ratio.

Point 4: Earnings calls showed an increase in ‘crude oil/fuel’ and a decrease in ‘tariffs’

Using the database of earnings call transcripts for the 30 companies, I compared the most recent calls, the previous calls, and the calls from about a year ago for the same companies. For the most recent calls, 22 companies held them in October–November, and 8 held them in August. Statements by the company side (management and IR representatives) and questions from analysts were counted separately. The classification of speakers was determined based on the moderator’s introduction and the order of speaking, and while I visually checked the list of speakers and corrected errors, it is not perfect. Since I am only counting the appearance of words, this includes negatives and standard disclaimers. It is a gauge to measure the temperature of topics.

Among the 30 companies, 10 (33%) touched on terms related to crude oil and fuel in their statements, a significant increase from 2 (7%) a year ago. In addition, 3 companies were mentioned only in analysts’ questions. On the other hand, in company statements, mentions of tariffs fell from 57% to 33%, and interest rates fell from 37% to 20%. AI was mentioned by 83%, further cementing its position from 70% a year ago. As for recession, 0 companies mentioned it, both on the company side and in analysts’ questions, both now and a year ago.

High costs are reflected in company explanations. 3M expects an increase in costs due to higher crude oil prices of $185 million (approximately 29.2 billion yen), raising it from the $150 million to $175 million range estimated in July. In exchanges with analysts, the company explained that it is offsetting this increase through price hikes. Walmart, in its August earnings call, projected an increase in fuel costs of over $2 billion (approximately 316 billion yen). Procter & Gamble stated that it is closely monitoring consumer demand as high fuel and energy costs continue from autumn through winter.

Interest rates also remain a factor. David Solomon of Goldman Sachs explained that the Fed raised interest rates in September for the first time in three years. In JPMorgan Chase’s earnings call, an analyst asked about the economy’s resilience if the 10-year Treasury yield reaches 6%. However, the company’s card spending is up 10% year-on-year, and consumption figures have not yet collapsed.

Earnings for financial stocks remain strong. Goldman Sachs’ revenue from M&A advisory for the July–September quarter was $1.7 billion (approximately 268.6 billion yen), up 18% year-on-year, and revenue from equity underwriting was up 43%. The earnings of the company with the largest weighting in the Dow are supported by the activity in capital markets.

Biggest risk: A correction in AI-related stocks and the persistence of high interest rates and crude oil prices occurring simultaneously

There are three risks, and they drag down the same P/E ratio from different directions.

The first is a correction in AI-related stocks. Although the weighting of the five giant tech companies in the Dow is small at 18.6%, three companies—Caterpillar, Microsoft, and NVIDIA—account for 36.1% of the next fiscal year’s earnings growth. If the outlook for data center investment declines, a drop of over 1,000 points by a single company, like Caterpillar this past month, could occur.

The second is interest rates. The expected earnings yield of stocks (the reciprocal of the P/E ratio) is 5.63%, and the difference from the 10-year Treasury yield of 4.86% is 0.77 percentage points. This difference is one benchmark for looking at the relative attractiveness of stocks, but because it does not include future earnings growth, one cannot judge whether stocks are overvalued or undervalued based on this alone. Even so, when interest rates rise, the P/E ratio applied to the same earnings tends to fall.

The third is the concentration in financial stocks. Financials account for 27.1% of the stock price weighting, with Goldman Sachs alone accounting for 10.0%. If capital market transactions dry up, the outlook for this one company, which holds 15.3% of the next fiscal year’s projected earnings, will decline.

The following three indicators are to be monitored. None of these are verified signals, but rather my own monitoring hypotheses.

・10-year Treasury yield: Currently 4.86%, warning line 5.5%. This is the level where the difference from the expected earnings yield almost disappears.

・Caterpillar’s order backlog: Currently $78 billion. If it decreases from the previous quarter in the January–February earnings report, I will revise the assumptions for data centers.

・Goldman Sachs’ M&A advisory revenue: If it becomes negative year-on-year in the January earnings report, I will revise the earnings outlook for financial stocks.

One-year scenario (my own estimates)

The following is an estimate based on my assumptions and is not an outlook presented by S&P Dow Jones Indices or the companies themselves.

The formula is ‘Index Forward EPS × (1 + 1-year earnings growth forecast) × Forward P/E Ratio.’ The index’s forward EPS is calculated as 2,881.2, derived by dividing the closing price of 51,285.73 by the forward P/E ratio of 17.8x. This 2,881.2 already includes significant earnings growth from Merck, Boeing, and NVIDIA. ‘Growth’ refers to how much this 2,881.2 figure will increase when measured the same way one year from now.

・Bullish: Growth +10% (AI investment and capital markets remain strong, leading to upward revisions), P/E 20x → 3,169.3 × 20 = 63,387 (+23.6% from current price)

・Base: Growth +6% (In one year, the ‘forward’ period will shift to the next fiscal year. This is the author’s assumption that growth for the next fiscal year will be roughly the same as the +6.3% forward earnings growth rate excluding the three companies), P/E 15.5–18.5x → 3,054.1 × 15.5–18.5 = 47,338–56,501 (-7.7% to +10.2% from current price). The upper limit of 18.5x is based on the S&P 500’s forward P/E of 18.7x as of October 30, according to FactSet. The lower limit of 15.5x is the level where the gap between the earnings yield and the 10-year Treasury yield widens to about 1.6 percentage points, roughly double the current level.

・Bearish: Growth -12% (AI investment slows down and capital markets cool), P/E 15x → 2,535.5 × 15 = 38,032 (-25.8% from current price)

The bearish figure of 38,032 is -30.0% from the August 5 high. This decline falls between those seen in 2022 (-21.9%) and 2020 (-37.1%).

Author’s View

My overall judgment is to ‘wait and see.’ However, this applies to investing a lump sum of new capital; it is not a reason to stop regular monthly contributions. If the index falls to 47,338 or lower (-7.7% from the current price), I will switch to ‘buy.’

47,338 is a level to consider buying. However, this assumes that current earnings forecasts (index forward EPS of 2,881.2) are maintained. If earnings forecasts are revised downward, I will recalculate the buy level.

There are three reasons for this judgment, in order of high confidence.

The first is the index’s position. The current price is within the base scenario range of 47,338–56,501, at a position 1.2% lower than the midpoint (51,920). It cannot be called either cheap or expensive. With +1.2% to the midpoint above and -25.8% to the bearish scenario below, I believe there is more room to the downside for a lump-sum entry.

The second is the composition of earnings growth. Of the +10.0% forward earnings growth rate, 38.5% comes from the earnings growth of three companies, including recovery from temporary expenses and a return to profitability. Excluding these three, the growth is +6.3%, which is not high relative to the 17.8x P/E ratio.

The third is interest rates. With the 10-year Treasury yield at 4.86%, the gap with the expected earnings yield is 0.77 percentage points. Since this gap does not include earnings growth, it cannot be called expensive based on this alone. However, the Fed raised rates in September, and I do not believe this is the time to bet on P/E expansion from an interest rate perspective.

On the other hand, the performance of the constituent companies themselves has not collapsed. Caterpillar’s order backlog is up +96% year-over-year, Goldman Sachs’ M&A advisory revenue is up +18%, and JPMorgan Chase’s card spending is up +10%. The October employment report released on November 6 also showed that the number of employed persons increased by 165,000, exceeding expectations. These are not factors to judge as a ‘sell.’

The reason to continue regular contributions lies in the statistics in point 1. The percentage of 10-year holding periods with dividends included that were positive is 97.8% (this is based on overlapping past data, not a future probability). I believe that continuing is more impactful on the results than trying to guess whether the current level is high or low.

If you have funds to invest in a lump sum, divide it into three parts. The first is when it breaks below 47,338, the second is at 45,811 (-10.7% from current price) when setting the P/E lower limit to 15x, and the third is when confirming Caterpillar’s order backlog and Goldman Sachs’ revenue in the January–February earnings season.

Note that the Dow Jones Industrial Average only includes 30 companies, and companies with higher stock prices have a larger weighting. The top 5 companies account for 32.9%, and financials account for 27.1%. Evaluation varies depending on whether you view the low weighting of giant tech companies as diversification or as missing out on growth. Over the past 10 years, the total return including dividends was +247.2% for DIA and +312.9% for SPY.

The assumptions relied upon are two: the growth in earnings forecasts (base +6%) and the range of forward P/E ratios (15.5–18.5x). If the lower limit of the P/E is set to 16x, the buy-switch level rises to 48,866 (-4.7% from current price), and if set to 15x, it falls to 45,811 (-10.7%). If growth is lowered to +3%, it becomes 45,999 (-10.3%).

Additionally, the base scenario assumes that the earnings growth of Merck, Boeing, and NVIDIA included in the 2,881.2 figure is realized. The 47,338 buy level is also based on that premise. If the earnings growth of those three companies disappears and the growth from the fiscal year shift cannot be expected, calculating with the same P/E range results in approximately 43,100–51,440, with the upper limit being almost the same as the current price (+0.3%). This is a reference value with adjusted conditions, not the base scenario.

If the 10-year Treasury yield or Caterpillar’s order backlog exceeds the warning line, I will replace the base scenario’s growth with a negative figure and lower the range itself.

My judgment on the S&P 500 itself is written in the previous S&P 500 article. Compared to the S&P 500, the Dow Jones Industrial Average is an index with a lower weighting of giant tech companies and a higher weighting of financials and capital goods, so the price movements differ significantly even over the same month.

Future Outlook

Confidence: High ── Strength of Financial Sector Earnings

Goldman Sachs has seen growth in both M&A advisory and equity underwriting, while JPMorgan Chase reports consumer spending up 10% year-over-year. Both companies’ next earnings reports are in January, and as of now, there are no visible factors that would significantly undermine their earnings outlooks by then.

Confidence: Medium ── When Will Interest Rates and Oil Prices Stabilize?

The Fed raised the policy rate to 3.75–4.00% in September and held it steady on October 28. The FOMC meeting on December 8–9 is the next key milestone. Over the past week, WTI crude oil fell -12.8% to $90.83, and Brent crude fell -16.4% to $98.32 (futures closing prices). If they remain stable, the high costs mentioned by companies like 3M and Walmart may begin to ease.

Confidence: Low ── Achieving the Projected 10.0% Earnings Growth for the Next Period

This forecast assumes the normalization of Merck’s expenses, a return to profitability for Boeing, and significant earnings growth for NVIDIA. Boeing has stated that production ramp-ups are taking longer than expected, and it remains to be seen whether all three companies will achieve their projected growth.

Upcoming Key Schedule

Earnings are scheduled for Cisco on November 12, Home Depot, Walt Disney, and NVIDIA on November 17, and Walmart on November 19 (US time). The FOMC meeting is on December 8–9.

Summary

The Dow Jones Industrial Average held at -0.5% while the S&P 500 fell -5.7% over the past month. However, Caterpillar alone dragged the index down by 1,812 points, with gains in companies far removed from AI offsetting this impact. My estimate for the forward P/E ratio is 17.8x, and nearly 40% of the projected earnings growth relies on just three companies.

The conclusion is to “hold off” on lump-sum investments and “buy” at or below 47,338. This level assumes that current earnings forecasts are maintained. I believe this is a phase where you should continue your dollar-cost averaging while pre-determining the levels at which to buy during dips.