The Dow Jones Industrial Average surged yesterday, welcoming warmly the Fed’s policy decisions to combat inflation. However, the market remains volatile with the uncertain economic outlook. Against this backdrop, we think it could be wise to avoid DJIA stocks Walt Disney Company (NYSE:DIS) and Verizon Communications (VZ), which are both down more than 10% in price this year. Read on.The Dow Jones Industrial Average has performed solidly, returning 17.4% year-to-date. With the economy's gradual recovery due to an increasingly COVID-19 vaccinated population and the rise in industrial activity, the DJIA scaled new highs. The index hit its 52-week high of 36,565.73 on November 8, 2021. It surged 380 points yesterday, while the S&P 500 reported its second highest close of 2021.
Economic development and changes in the overall outlook led the Fed to announce yesterday its decision to combat rising inflation by accelerating the reduction of its bond purchases. The Fed also announced that interest rate hikes will be adopted as soon as the bond purchase tapering is wrapped up in 2022. However, the Federal Open Market Committee reduced its forecast for economic growth to 5.5% for 2021, down from the 5.9% reported in September. So, the market’s volatility is expected to persist.
The Walt Disney Company (DIS) and Verizon Communications Inc. (NYSE:VZ) are two DJIA stocks that have retreated more than 10% on a year-to-date basis. In addition, they look overvalued at their current price levels. Hence, we think it could be wise to avoid them now.