Watch the Dow to Gauge Trade War Worries

“Looking through the Dow’s weightings, there aren’t many paths available for the Dow to go up on the year without some help from these stocks,” writes Colas.

The five stocks constitute 20% of the weight of the Dow, which is a price-weighted index, unlike the S&P 500, which is capitalization weighted. In the Dow, the more expensive a company’s stock price, the heavier its weight in the index.

Many commentaries on a potential trade war between the U.S. and China focus on Boeing, which accounts for more than 9% of the Dow. Boeing is the biggest exporter among U.S. companies, with reportedly over $1 trillion in potential sales over the next 20 years and accounts for more than half the commercial airliners operating in China. And China has identified aerospace companies as a target of proposed 25% tariff. But Boeing, Colas says, “is actually holding up the Dow in 2018 — not pulling it lower.”

(Related: Trade Wars and Protectionism Unsettle Institutional Investors)

Three of the other eight Dow gainers so far this year are tech stocks: Cisco, Intel and Microsoft; and three are financial stocks: JPMorgan, Travelers and Visa.

DataTrek doesn’t expect a recovery in the Dow until worries over trade talks abates. One indicator of that: When the Dow beats the S&P 500. “The average, while an ancient market measure, really is the barometer to watch on this important market dynamic,” writes Colas.