On Friday, the DJIA hit another major milestone, fresh weekly highs. This achievement is particularly impressive considering consumer sentiment now finds itself in steep and worrying freefall. The DJIA is the second oldest stock market INDEX in the world. It is made up of the 30 most highly traded stocks across the US. Investors appeared to overlook the latest findings from the University of Michigan’s Consumer Sentiment Index, which recorded its second-lowest reading on record, as they reacted positively to the index’s performance.
Meanwhile the DJIA has shot back toward the 42,500 range. That’s the first time it has done so since March. After some rough weeks of trading, it has climbed back to positive territory for 2025, in line with a general recovery across the market. In this article we’ll take a look at some of the forces fueling this resurgence. How consumer sentiment tends to affect future market performance.
Overview of the Dow Jones Industrial Average
The Dow Jones Industrial Average continues to be a key barometer of the overall strength of the U.S. stock market. Created in 1896, as one of the oldest and most famous indices, it equally represents companies in technology, consumer goods, financial services, health care and much more. The index provides investors a simple, unvarnished picture of how we’re doing economically. It currently includes 30 companies, selectively screened for their high level of trading liquidity and market cap.
Over the past few weeks, the DJIA has shown remarkable strength in the face of adversity. Following a tumultuous first quarter that saw trade headlines trigger a significant downturn, driving the index to approximately 36,600, the DJIA’s recovery has been notable. The aggregate performance of these companies, particularly as revealed in their quarterly earnings reports, plays a crucial role in influencing the index’s overall movement.
On the downside, investors can trade the DJIA as a singularity, making use of exchange-traded funds (ETFs). This new system streamlines their investment strategies and curtails the complex art of purchasing specific stocks altogether. This democratization has opened the index’s performance up to a wider swath of investors and has contributed to the growth of passive investing.
Consumer Sentiment and Market Dynamics
So even with the DJIA recovered, these economic indicators are somewhat scary to me. The University of Michigan’s Consumer Sentiment Index fell to 50.8 from 52.2. This collapse is representative of a darkening consumer sentiment toward overall economic productivity, earnings, and employment prospects. With this historic drop, Gallup is signaling that consumers are extremely worried about what the future holds for their finances.
Inflation expectations have increased as well, with one-year expectations jumping to 7.3% and five-year expectations up to 4.6%. In the short term, consumers should continue to expect high prices. This chilling effect could additionally reduce consumption in turn and slow economic growth more broadly.
Consumer sentiment and stock market returns have a complicated relationship. Consumer confidence is critical to the consumer driven economy, it can create or destroy spending patterns and economic activity. The recent DJIA rally shows that investors are focused on business profitability even while the consumer outlook is tepid at best.
Technical Analysis and Market Trends
As the DJIA approaches key technical levels, chart analysts note critical resistance and support zones that could influence future trading patterns. Technically, there’s a resistance zone from March’s swing high at about 42,800. If the index is able to break above this area, it could indicate that even more bullish momentum is brewing.
The 42,000 handle is well poised to act as a technical floor for the index. Keeping this pace will be important for continuing to build investor confidence during a time of uncertain and changing economic signals. Positive market perception expects a slow rebound from earlier policy moves made under Donald Trump’s administration, especially in terms of trade tariffs.
Before the Trump administration, the U.s.’s Effective Tariff Rate (ETR) rate was about 2.5%. In fact, during his short tenure, tariffs tripled, especially on imported products from China. Even after rolling back some of these extreme tariffs that had spiked up to 145%, rates are still over 30%. This context adds another layer of complexity to market dynamics as investors navigate ongoing trade negotiations and their potential impacts on economic conditions.