The Dow Jones Index surged to a record high this week, continuing a trend that started in April when it crashed to a low of $36,620. It has now jumped by over 22%, meaning that it is in a bull market. Here are some of the top reasons why the Dow Jones Index has more upside to go.
Dow Jones Index has strong technicals
The first main reason why the Dow Jones may have more upside to go is that it has strong technicals. It has formed the highly bullish golden cross pattern in June as the 50-day and 200-day moving averages.
Most importantly, the stock formed the inverse head-and-shoulders pattern. This pattern comprises of a head, which, in this case, is at $36,627. The left shoulder is at $41,870, while the right one is at $43,350. It is common for the shoulders to be in different levels.
The Dow Jones Index will likely continue rising in the next few months, with the next point to watch being at $50,000. This forecast will become invalid if it crashes below $43,350.
Federal Reserve interest rate cuts
The other main reason why the Dow Jones Index has more upside is that the Federal Reserve will start cutting interest rates this year. While odds have dropped recently, they still remain above 70% on Polymarket.
The CME Fed Futures tool has the odds at 72%. These odds pulled back slightly after the United States published strong inflation data. The report showed that the core consumer price index (CPI) jumped to 3.1% in July. Another one revealed that the producer price index (PPI) soared to 3.6%.
The main concern is that the US may be barreling towards a stagflation, which is characterized by high inflation and slow economic growth. A recent report showed that the country’s unemployment rate rose to 4.2% as hiring largely stalled.
As such, the Fed will likely elect to cut interest rates as it focuses on the unemployment rates. More cuts will likely happen in 2026 after Donald Trump replaces Jerome Powell as the Fed Chair.
Historically, the Dow Jones and other stock indices do well when the Fed is cutting rates.
Strong corporate earnings
The other key reason why the Dow Jones Index may keep rising this year is that American companies have published strong financial results despite the tariff woes.
Data compiled by FactSet shows that the the blended earnings growth in the second quarter was 11.8%, much higher than the median estimate of 4.8%. It was the third consecutive quarter of double-digit earnings growth, a sign that these firms are doing well. Most importantly, more companies provided bullish forecasts.
Tariffs are priced in
The Dow Jones Index will also benefit from the fact that Donald Trump has reached deals with the most important countries like China, Japan, South Korea, and the European Union. Most of these deals have had the US leaving tariffs of at least 10%, which is not good for most companies.
However, the Dow Jones will benefit from the certainty that these deals bring. This is one of the top reasons why the Fear and Greed Index has remained in the greed zone.
There are other reasons why the Dow Jones and other top indices will continue rising this year. For example, it will benefit from the ongoing weaker US dollar and the bullish forecasts by some of the top analysts, including those from Citigroup and Morgan Stanley.
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