Dow Jones (DJIA) Retreats from Fresh All-Time Highs. A Pause Before the Next Leg Higher?

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The Dow Jones Industrial Average reached a record high on Friday, becoming the last of the three major U.S. indexes to hit a new peak. This rally was driven by hopes for easier monetary policy, reduced trade tensions, and strong corporate earnings.

The Dow climbed past its previous high of 45311 from July 28, boosted by a surge in UnitedHealth Group shares after Warren Buffett's Berkshire Hathaway announced a new investment in the company.

The Dow's rise this year has been driven by strong performances from Goldman Sachs, Microsoft, and Caterpillar.

Nvidia, a leader in AI and chip design, also played a big role. It became the first public company to hit a $4 trillion market value, with its stock up over 30% this year.

Source: LSEG

The Dow has risen over 20% since its low in April, following President Trump's announcement of major "reciprocal tariffs" to reshape global trade in favor of the U.S.

With new trade deals made with the UK, Japan, and the EU, investors are confident that a global recession is unlikely.

US Retail Sales Rise, Industrial Output Falls

Sales growth is steady but still facing challenges. In July, overall retail sales increased by 0.5%, slightly below the expected 0.6%, with a small upward revision of 0.1%. Sales excluding autos rose by 0.3%, matching expectations, and were revised up by 0.4%.

Meanwhile, control retail sales, which exclude more volatile categories, grew by 0.5%, just above the 0.4% forecast, with a similar upward revision of 0.4%.

This report helps ease concerns about consumer spending after the tariff impact, thanks to small gains in sales and upward revisions to previous months' numbers.

However, spending growth still seems weak, and with a slowing job market and more tariff effects expected, a big rebound in growth is unlikely.

In what should be a concern for market participants when it comes to the DOW in particular, Manufacturing is showing signs of stagnation again, as weak surveys suggest.

In July, industrial production dipped by 0.1%, slightly below expectations, while manufacturing output stayed flat. Although manufacturing saw some growth earlier this year, it has now leveled off, with production likely to remain sluggish in the coming months. Key indicators, like the ISM new orders index and regional Fed surveys, show ongoing weakness in future production and investment plans.

Despite trade deals and tax incentives, there’s no evidence that tariffs are driving significant investment in U.S. manufacturing. High labor costs compared to overseas markets make it unlikely that tariffs alone will bring back many manufacturing jobs without causing steep price increases for consumers.

Global Equity Fund Flows Hit Six-Week Highs

Global equity funds saw their biggest weekly inflows in six weeks by August 13, thanks to lower-than-expected U.S. inflation and a tariff truce between the U.S. and China, which boosted investor confidence.

Technology stocks, like Apple, attracted strong interest after the company announced new U.S. investments to avoid tariffs on iPhones.

Investors poured a net $19.32 billion into global equity funds, bouncing back from the $7.63 billion net outflow the previous week, according to LSEG Lipper data. U.S. equity funds led with $8.77 billion in inflows, recovering part of the $13.89 billion outflow from the prior week. European and Asian funds also gained $7.08 billion and $2.07 billion, respectively.

Source: LSEG

Given that the Trump-Putin meeting begins in a short while, positive developments there could help remove any concerns around geopolitical risk moving forward. This in theory should be positive for risk assets and could see next week bring more flows toward global and US equity markets.

Is the DOW setting up for a run toward the 50000 psychological mark?

Technical Analysis - Dow Jones Index

From a technical standpoint, the Dow Jones index has printed a fresh all-time high, but is experiencing a pullback at the time of writing.

The index is down around 0.59% on the day. The golden cross pattern which took place on Tuesday and helped propel the index to fresh all-time highs may potentially be in for a retest in the week ahead.

As discussed above, the outcome of the Trump-Putin meeting could be the catalyst for risk assets and more particularly global equities to continue their impressive rise.

Trade deal concerns may remain, but a potential Russia-Ukraine deal could remove some of the geopolitical risk premium which has lingered in the minds of market participants despite the impressive equities rally in 2025.

On the upside there is no historical price action to analyze. This means focus will be on whole numbers and psychological levels such as the 46000 and 46500 handles.

A deeper pullback may look toward the 50-day MA which rests at 44382 before the 100 and 200-day MAs come into focus around the 43000 handle.

Dow Jones Daily Chart, August 15, 2025

Source: TradingView (click to enlarge)

Client Sentiment Data - DOW JONES Index

Looking at OANDA client sentiment data and market participants are short on the DOW with 75% of traders net-short. I prefer to take a contrarian view toward crowd sentiment and thus the fact that so many traders are short means the Dow Jones Index could rise in the near-term.

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

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