Why Is the Dow Jones On A Historic Losing Streak?

What’s New

The Dow Jones Industrial Average reported its longest losing streak in 50 years this week, after tumbling 1,123 points or 2.6 percent on Wednesday—a record in itself, as it was the biggest point drop since September 2022, Forbes reported. Wednesday also marked the steepest percentage drop since August 5 for both Dow Jones and S&P.

Overall, Dow Jones is down by a total of 2,700 points compared to December 5, when its down streak started. Wednesday marked the tenth straight losing session for the index—the longest streak since 1974, when it fell for eleven days in a row.

Why Is The Stock Market Down

The disastrous plunge followed the Federal Reserve’s decision to cut interest rates by 25 basis points this week, as was widely expected by investors, and its suggestion that there will be only two more 25 basis-point cuts next year, instead of the four previously projected. That’s because the central bank now expects inflation to remain above the level they previously predicted for longer.

The interest rate cut announced on Wednesday was the third consecutive one implemented by the central bank this year after inflation finally stabilized in the U.S. Fewer cuts next year likely means that Americans should expect rates to remain above the 3 percent mark throughout 2025—a prospect that most investors were not prepared for.

A more moderate approach to normalizing interest rates by the Fed likely means smaller profit margins for corporations in the U.S., as the cost of borrowing will remain higher than previously expected. This new prospect, in turn, has triggered the investors’ stocks sell-off.

Newsweek contacted JPMorgan, S&P, Bank of America, and Moody’s Analytics for comment by email on Thursday morning.

How Does The Dow Jones Reflect The U.S. Economy?

The Dow Jones’ slump reflects widespread uncertainty about the future of the U.S. economy as the country prepares for a second Donald Trump administration and inflation is rising again as a result of growing groceries, hotels and used cars.

In November, consumer prices rose 2.7 percent compared to a year earlier, up from 2.6 percent in October. Commenting on inflation in early December, the Fed’s chair Jerome Powell said: “We’re not quite there on inflation, but we’re making progress. We can afford to be a little more cautious.” The central bank has previously expressed its belief that inflation is continuing to cool down to its target level, but the way there might be a bumpy one.

One thing that could significantly affect inflation in the near future is Trump’s plan to impose tariffs on goods coming into the U.S.—a move that, if implemented, could increase prices. This uncertainty is reflected in the markets as well.

After Trump’s victory in November, the markets—including the Dow Jones—temporarily surged, reaching record levels as investors felt optimistic about the Republican candidate’s promises of corporate tax cuts, deregulation and tariffs.

But despite the markets’ initial enthusiasm, there’s no certainty over what policies Trump will manage to put into action, and how these will affect the U.S. economy—especially when it comes to tariffs Trump wants to impose on goods coming from countries such as Canada, China, and Mexico.

“A few weeks postelection, the stock market took a bit of a downturn as the frenzy and excitement of the election concluded,” George Kailas, CEO at Prospero.ai, told Newsweek in a written statement.

“Two weeks after the election, the Dow Jones Industrial Average fell 0.7 percent, followed by the S&P 500 and NASDAQ, each slipping 1.32 percent and 2.24 percent respectively. This reflects an understandable disconnect between initial excitement and policy,” he added.

“The prior Trump administration was highly friendly to the stock market and it is more than fair to expect that again as he has called that out as an important benchmark. We do think there are some expected winners that are too obvious to ignore, like Coinbase and Tesla.”

When Could The Index See A Turnaround?

Experts think it’s unlikely that the Dow Jones downturn will last much longer. “The good news is any near-term selling could be fairly brief,” MarketWatch columnist Michael Brush wrote for the Dow Jones Newswires.

“Over the past 25 years, the longest stretch of January selling following a strong market year lasted four weeks. More importantly, it’s unlikely this will become a bear market, a 20 percent or more decline,” he added. “That’s because the economy is not likely to go into a recession soon.”

Despite some setbacks this year, the U.S. economy still grew at a 2.8 percent pace between July and September, showing it remained strong in the face of higher rates. But Wall Street is now generally expecting growth to be a little more modest than they previously thought next year.

“Heading into 2025, the focus is squarely on postelection policy shifts in the U.S. and their broader economic implications,” Ken Wattret, Global Economist, S&P Global Market Intelligence, said in a press release.

“With renewed inflationary pressures expected to pause the Fed’s easing cycle, global financial conditions are going to be much less accommodative than previously expected. This spells trouble for economic growth; we are lowering our forecasts pretty much across the board.”