Is the Dow Flashing a Warning Sign For Investors?

It hasn’t been the best start to the year for the Dow Jones Industrial Average, which finds itself on a three-week losing streak to cap off January. Undoubtedly, the Dow, a basket of 30 stocks, isn’t exactly the best gauge of the market, but it is worth keeping tabs on whenever its performance deviates from the S&P 500. While the S&P 500 is a much better gauge of how the broader market is faring, tech has grown to account for quite a hefty slice of the pie.

It’s been a choppy January. Will volatility stay higher for longer?

While there are better ways to track how U.S. large-cap value is faring, I do think the Dow remains a quick and easy way to spot any sudden sentiment shifts on any given day. Of course, given that the index is price-weighted, I wouldn’t take any trends too seriously. If anything, the Dow is more of a fun basket to watch than anything else, especially since one can easily look underneath the hood to see what’s gone wrong (or right). 

In any case, with the S&P and Nasdaq 100 also having a rough second half of January, questions linger about whether the rest of the year will be like January. Personally, I wouldn’t make too much of the Dow’s recent three-week losing streak. As we found out in the depths of January, stocks can bounce back quite quickly.

Indeed, volatility can work on the way up just as it does on the way down. And that’s why 2026 might be a dangerous year to time the market, especially if heightened volatility becomes more of an expectation than anything that’s all too surprising.

Looking under the hood of the Dow after a jumpy January

Looking underneath the hood of the Dow, we’ll see that it’s the same laggards from last year that have dragged the index lower in the first month of January. Undoubtedly, Salesforce (NYSE:CRM) and UnitedHealth Group (NYSE:UNH) are down around 20% and 13%, respectively, year to date. On a more surprising note, Microsoft (NASDAQ:MSFT) stood out as a double-digit percentage loser so far in 2026, which is now down just over 12% on the year.

Undoubtedly, the Dow seems to be feeling the impact of the software slump as well as the recent pressure on certain parts of the financial sector, with JPMorgan Chase (NYSE:JPM), and American Express (NYSE:AXP), two fairly large holdings in the Dow, all treading water since the Trump credit card cap plans sparked a fairly nasty dip in the banks. 

Despite these notable dents in the armor, however, I wouldn’t be so quick to dub the Dow’s three-week losing streak as a sign of more pain to come.

If anything, the headline makes things look worse than they actually are, with the Dow finishing the last three weeks off by a fraction of a percent. All it takes is one good up day to make up for the slow-and-steady bleed that was the last three weeks. While the terrain may have been a bit rougher for investors in the past three weeks (perhaps those overweight in software or financials), I’m more inclined to view the recent volatility as normal, even healthy.

My real issue with the Dow going into the remaining 11 months of the year

The Dow is not a perfect index, and there are far better ways to play a broad market shift from growth towards value. But, at the end of the day, I don’t see anything to get worried over with the Dow, especially when you consider the fairly modest price of admission (23.6 times trailing price-to-earnings) relative to the S&P or Nasdaq 100. 

If anything, my biggest concern with the Dow is the relative lack of weight to the mega-cap tech stocks looking to monetize AI. Of course, you’ll pay up for this premier AI exposure, but if the titans get monetization right, I think there’s a good chance the Dow could be left behind as the S&P’s concentration in big tech turns into a source of strength.

While the S&P has been just as turbulent as the Dow in January, I certainly wouldn’t get anxious here, even if a correction does loom. At the end of the day, heightened volatility and multi-week losing streaks present an opportunity for stock pickers willing to be selective.