Even if you weren’t paying attention, you couldn’t have missed what an unpredictable year 2019 has been for markets both in the U.S. and globally. Our economy represents about 20% of total global output. Economic growth in modern economies depend on several factors, including an efficient financial sector which encompasses well-functioning capital markets. Most economists and researchers would easily concur that U.S. equity markets are an important engine of innovation, technological advancement and economic growth.

Recent research led by James Brown of Iowa State University highlights that “the high-tech sector accounts for the majority of corporate innovation in modern economies. [There is] strong positive connection between a country’s equity market development and the size of its high-tech sector.”

Therefore, as we start a new decade, I’d like to take a closer look at how the Dow Jones Industrial Average (DJIA), one of the most commonly followed equity indices worldwide, has fared over the past year and discuss several themes I’ll be watching in 2020.

The Dow Jones Industrial Average in 2019

The U.S. has the world’s largest economy by nominal GDP. However, a year ago, as we ended 2018, many people were wondering if broader stock markets would have a rather difficult 2019. It would not be an exaggeration to say that there was a lot of nervousness — or even fear — in the air.

Investors were rightfully concerned about U.S.-China trade wars, a global slowdown especially in China and emerging markets, interest rates, oil and gold prices. Eventually, the dust settles in the equity markets and strong stocks shine. And that is what has happened in 2019, too.

Not many would possibly have imagined that the DJIA would be delivering a gain of more than 22% during the year. This return does not include the regular dividends paid by all 30 stocks in the index. In fact, many of them are Dividend Aristocrats, or companies that have consistently increased dividends at least once a year for the last 25 years.

Thus in hindsight, a combination of growth and dividend income would have made the DJIA an ideal portfolio choice.

As we start the new decade, we note that low interest rates, a historically strong domestic labor market and easing of U.S.-China trade war fears have helped send markets to all-time highs.

The final quarter of the year was especially strong for many stocks. Individual days when we had some selling pressure in the broader market were quickly followed rather strongly up days.

While past performance may not exactly repeat in the months ahead, the track records of the index highlights its growth potential.

Now let us see how each stock in the index has done over the past 52 weeks.

Dow Jones Stocks

There are 30 large-cap stocks in the Dow Jones Industrial Average. Most are household names. Here is how their stock prices have changed in 2019 as well as their current dividend yields.

1. Apple (NASDAQ:AAPL) – Up about 86% in 2019, current dividend yield 1.1%.

2. American Express (NYSE:AXP) – Up about 30%, current dividend yield 1.4%.

3. Boeing (NYSE:BA) – Up about 1%, current dividend yield 2.5%.

4. Caterpillar (NYSE:CAT) – Up about 16%, current dividend yield 2.8%.

5. Chevron (NYSE:CVX) – Up about 11%, current dividend yield 3.9%.

6. Cisco Systems (NASDAQ:CSCO) – Up about 11%, current dividend yield 2.9%.

7. Coca-Cola (NYSE:KO) – Up about 17%, current dividend yield 2.9%.

8. Dow (NYSE:DOW) – (DOW stock is a spinoff from DowDuPont. It started trading in March 2019 at an opening price of $52.75. The return is since that date.) Up about 4%, current dividend yield 5.1%.

9. Exxon (NYSE:XOM) – Up about 2%, current dividend yield 4.9%.

10. Goldman Sachs (NYSE:GS) – Up about 38%, current dividend yield 2.2%.

11. Home Depot (NYSE:HD) – Up about 27%, current dividend yield 2.5%.

12. Intel (NASDAQ:INTC) – Up about 28%, current dividend yield 2.1%.

13. IBM (NYSE:IBM) – Up about 18%, current dividend yield 4.9%.

14. JPMorgan Chase (NYSE:JPM) – Up about 43%, current dividend yield 2.6%.

15. Johnson & Johnson (NYSE:JNJ) – Up about 13%, current dividend yield 2.7%.

16. 3M (NYSE:MMM) – Down about 8%, current dividend yield 3.2%.

17. McDonald’s (NYSE:MCD) – Up about 11%, current dividend yield 2.5%.

18. Merck (NYSE:MRK) – Up about 19%, current dividend yield 2.7%.

19. Microsoft (NASDAQ:MSFT) – Up about 55%, current dividend yield 1.3%.

20. Nike (NYSE:NKE) – Up about 37%, current dividend yield 0.9%.

21. Pfizer (NYSE:PFE) – Down about 10%, current dividend yield 3.9%.

22. Procter & Gamble (NYSE:PG) – Up about 36%, current dividend yield 2.4%.

23. Travelers Companies (NYSE:TRV) – Up about 14%, current dividend yield 2.4%.

24. UnitedHealth (NYSE:UNH) – Up about 18%, current dividend yield 1.5%.

25. United Technologies (NYSE:UTX) – Up about 41%, current dividend yield 1.9%.

26. Verizon (NYSE:VZ) – Up about 9%, current dividend yield 4.1%.

27. Visa (NYSE:V) – Up about 42%, current dividend yield 0.6%.

28. Walgreens Boots Alliance (NASDAQ:WBA) – Down about 14%, current dividend yield 3.1%.

29. Walmart (NYSE:WMT) – Up about 28%, current dividend yield 1.8%.

30. Walt Disney (NYSE:DIS) – Up about 32%, current dividend yield 1.2%.

In short, of these 30 companies, 27 have been good investments, offering a wide range of returns. The three exceptions are MMM, PFE and WBA stocks.

However, shareholders in all three of those companies also receive dividends. And that passive income would have made the loss in stock price less painful, especially if those dividends were reinvested.

Themes I’m Watching in 2020

This year, I expect risk appetite to stay strong, especially amid further hopes of progress on a trade war truce between the U.S. and China. However, if trade frictions resurface, then they could likely weigh on growth and rattle equity markets.

The Federal Reserve as well as most central banks globally are likely to remain supportive and maintain the current era of low interest rates — a factor that would bode well for equity markets. I would not fight the Fed.

Consumer spending is likely to stay healthy at least in the early part of the year. However, it is quite impossible to predict when investor sentiment may turn sour.

High-quality tech stocks will likely to provide the tailwind for broader markets this year, too. Yet many may not be able to repeat the exceptional performance of 2019. Investors should remember that tech stocks tend to be highly volatile, especially on a shorter-term trading basis.

2020 may prove to be another solid year for mergers and acquisitions as several mid-cap companies as well as start-ups may be subject to interest by large caps and private equity firms that have plenty of cash to spare. Similarly the IPO market is likely to be quite active.

Needless to say, this is the year of the U.S. presidential election. Therefore broader markets are likely to get choppy as election day draws closer in November. Discourses around regulatory backlash against Big Tech as well as Big Pharma will likely affect the prices of many stock in these industries. On another note, presidential cycles in general mean strong advertising revenue for advertisers.

Finally, many investors will likely be paying attention to companies that may benefit from sustainable investing themes, not only this year but throughout the decade.

The Bottom Line

We have finished 2019 with the biggest market gains since 2013. Broader indices amd many stocks have recovered from the correction we saw in the final quarter of 2018 and reached new highs.

Does being a component of the Dow Jones Industrial Average make a stock a good make a good investment in 2020?

The answer would depend on several factors, starting with your investing goals and time horizon. Were I to look for quality “blue chip” stocks with reliable dividends, it’d certainly be the first index I’d start analyzing.

If and when quality goes on sale some time, as they usually do at some point in most years, I hope you will be ready to do due diligence on those stocks that may be suffering temporary setbacks. Buying the dips may help increase your long-term portfolio returns.

Now, it just remains for me to wish you a happy and prosperous 2020!

As of this writing, the author has covered calls on CSCO, KO, MRK, PFE (all Dec 10 expiry).