The Underperforming Dow Jones Industrial Average. Full of Fossil Fuels and Forever Chemicals.

The Underperforming Dow Jones Industrial Average. Full of Fossil Fuels and Forever Chemicals.
 
In last week’s blog, we talked about the Magnificent 7 being largely responsible for the gains in 2023 – yes, just 7 stocks. The technology-rich NASDAQ Composite Index was far and away the winner on Wall Street this year. Meanwhile, energy, consumer staples, healthcare and utilities are all down.
 

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The Dow Jones Industrial Average was the laggard of the 2023 pre-election year rally. This has a lot to do with the older companies in the index that are laden with legacy debt and having to borrow money at a high interest rate, all while experiencing a slowdown in revenue growth. (Email [email protected] if you’d like to receive a Stock Report Card of select Dow components.) However, there is another issue with the “leading blue chip” index. It has a lot of old-school companies that are in the business of fossil fuels, either as a producer or as a top customer – something the world agreed to transition away from at COP28.
 
Fossil Fuels in the DJIA
Email [email protected], if you’d like to receive our chart of the 30 companies of the Dow Jones Industrial Average, along with some points about their respective fossil fuel dependency. A lot of the technology companies of the DJIA (Apple, Cisco, IBM, Intel, Microsoft and Salesforce) have goals of powering with renewables 70-100% by 2025. However, 13 of the 30 companies, 43.3%, are leading producers or customers of oil, gas, plastic and other petrochemical products. Here are a few examples…
 

• Coca-Cola is considered to be the worst plastic polluter in the world.
• 3M has agreed to a $2.3 billion settlement for pollution associated with their forever chemicals.
• Dow Chemical and 3M produce many chemicals used to make plastic, polyester and other petrochemical products (including those spilled in the train derailment in February of 2023 in Palestine, Ohio).
• Nike makes most of its shoes and clothing with rubber, polyester and nylon – all of which are derived from oil (less than 9% of plastic actually gets recycled).
•  Only 2% of McDonald’s annual 153,000 metric tons of plastic waste gets recycled.
• Chevron is an oil and gas company with a value of $281 billion.

 
Dow Inc., 3M, Chevron, Nike, Honeywell, Johnson & Johnson, Procter & Gamble, Verizon, and Walgreens are some of the 30 companies of the Dow Jones Industrial Average that are losing value and dragging down the performance of the index. The spectacular performance of Microsoft, Apple, Intel, IBM and Salesforce is responsible for the gains.
 
Oil/Gas & Chemicals Stock Report Card
All of the oil and chemical companies I analyzed have lower revenues this year. Most of the chemical companies have elevated levels of debt. Due to the toxic nature of their products, and the deleterious effects they have on water and soil, many chemical companies face ongoing fines and lawsuits. Email [email protected] if you’d like to receive a Stock Report Card of chemical or oil/gas companies.
 
Palestine, Ohio Toxic Train Derailment
The toxic oil-based petrochemicals that were spewed across the air, soil and water of Palestine, Ohio on February 3, 2023, included the following. If you look at what the toxins are used to make, you’ll notice that they touch almost every aspect of our lives, from what our things are packaged in, to what we wear and even our laundry detergent. 3M and Dow Inc. (both in the DJIA) are leading manufacturers of these petrochemicals.
 

• Vinyl chloride (used to make plastic, but is also found in “eco-friendly” laundry sheets, made by Dow Inc. and 3M)
• Ethylene glycol (antifreeze and coolant, made by Dow Inc. and 3M)
• Ethylhexyl acrylate (used in paint, polyester and to coat paper, made by Dow Inc. and 3M)
• Butyl acrylate (used in paint, polyester and to coat paper, made by Dow Inc., 3M and other chemical companies)
• Isobutylene (used in plastic, packaging, polyester and aviation gasoline, made by Dow Inc., 3M and other chemical companies)

 

 

Drone footage shows the freight train derailment in East Palestine, Ohio, U.S., February 6, 2023 in this screen grab obtained from a handout video released by the NTSB. Public Domain.

ESG Investing is Missing the E
As I mentioned in my blog, ESG investing is missing the E: environment. There are no companies that are involved in renewable energy or other planet-healthy products or services in the S&P Global ESG Index. At least 15 of the companies in the index are oil and gas related. Just 20 of the world’s largest fossil fuel companies are responsible for over 1/3 of the CO2 in the atmosphere – and many are included in the ESG Index. Click to read the blog.

Our Retirement Accounts
Because the DJIA is widely touted when we think of Wall Street, most of us have DJIA companies in our retirement plans and even our managed brokerage accounts – unless we’ve done a forensic dive to know exactly what we own and why. Many broker-salesmen will put us into ESG funds if we say we want to be more conscious about what we invest in. Getting our portfolio more in line with gains and green requires a little education and some remodeling of our financial house. Fortunately, this is as easy as a pie chart, once we learn the life math that we all should have received in high school and college. It’s our money, and making sure that we keep it is our job – even if we have someone else “managing it.”
 
Bottom Line
Whether you are pro-gains or pro-planet, the Dow Jones Industrial Average Index was a problem in 2023. The debt and core business models of many of the companies in the index could continue to be a challenge on profitability and revenue growth in the years to come. These are a few of the reasons why we have been underweighting the DJIA and using value replacement funds in our sample pie charts. (These are just a few of the things you’ll learn at our Financial Freedom Retreat.)
 
 

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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. Follow her on Instagram. 
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Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.​

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.