Will Boeing Get Booted Out of the Dow Jones Industrial Average?

NASA and Boeing welcomed Starliner back to Earth following the uncrewed spacecraft’s successful landing at 10:01 p.m. MDT Sept. 6, 2024, at the White Sands Space Harbor in New Mexico. Credit: NASA

Will Boeing Get Booted Out of the Dow Jones Industrial Average?
Why does this matter to your retirement plan?
 
The Dow Jones Industrial Average Index consists of just 30 companies. One of those companies is Boeing, a company that has consistently made headlines over the past decade for all the wrong reasons (some of which are outlined below). Boeing’s credit rating is BBB- with a negative outlook. A downgrade would take the company to speculative status (junk bond, not investment grade), which disqualifies the company from the index. Does this matter to your retirement plan? Yes.
 
Here are the topics we’ll cover in this blog.
 
Dogs of the Dow
The Challenges Keep Coming at Boeing
Can Boeing Fix Things Without a Credit Downgrade and Delisting?
Why Does This Matter to Your Retirement Plan?
What Can You Do?
 
And here is more information on each point.
 
Dogs of the Dow
It’s a little surprising that Boeing hasn’t been booted from the DJIA yet, given all the challenges the company has had, the low credit rating, and the fact that there are just 30 Blue Chips in the DJIA index. However, the index often sticks with former Blue Chips until the bitter end. AIG was removed on Sept. 18, 2008, days after the company received an $85 billion government bailout to avert bankruptcy. Amazon replaced Walgreens Boots Alliance on the DJIA on February 26, 2024, just five months before Walgreens was downgraded to junk by S&P Global on July 19, 2024.
 
As I mentioned in a previous blog, there are many other old-school corporations listed on the Dow Jones Industrial Average that have been underperforming on Wall Street. These include chemical companies Dow Inc. and 3M, and Verizon and The Walt Disney Co.
 
Below is a 5-year performance chart of the DJIA compared to the S&P500 and the NASDAQ Composite Index. As you can see, the DJIA is performing below both indices, and about half as strong as the technology and biotech-rich NASDAQ.

The Dow Jones Industrial Average (blue) compared to the S&P500 (red) and the NASDAQ Composite Index (green)

Source: MSN.com. © Microsoft. Used with permission.

The Challenges Keep Coming at Boeing
The whistleblowers have been warning of endemic safety violations for years. Boeing left two astronauts stranded at the Space Station. They will return to Earth in February of 2025 on a SpaceX aircraft. Boeing workers have been on strike since Sept. 13th. Boeing has admitted guilt to a criminal fraud charge and agreed to a plea deal with the Department of Justice over the two crashes of 737 Max jetliners that killed 346 people. (That deal has yet to be approved by a Houston judge.) A door panel exploded out of a 737-9 Max jetliner during an Alaska Airlines flight over Oregon in January (2024).
 
Not surprisingly, Boeing revenue slumped -14.61% in the 2Q 2024 quarter (from the same quarter the year prior). The company lost $1.4 billion in the 2nd quarter and anticipates another billion-dollar loss in the third quarter (source: Seattle Times). The strike has stopped production in Washington State and is now in its third week. Will all this result in the company’s credit rating dropping out of investment grade, causing the Dow Jones Industrial Average to boot it out of the 30-company index?

If you would like an updated Airlines, Chemical, or Defense Stock Report Card, or a list of the DJIA companies, email [email protected].
 
Can Boeing Fix Things Without a Credit Downgrade and Delisting?
After a series of terrible (criminal), greed-guided missteps in the C-Suite, Boeing is again trying a fresh hand at the helm of the company.  Kelly Ortberg, Boeing’s new CEO, has an engineering background. Dave Calhoun, the CEO between January of 2020 and August 8, 2024, had an accounting background. Dennis Mullenberg, who was Boeing’s CEO between 2015 and 2019, also had a degree in aerospace engineering and a master’s in aeronatics and astronomics. 
 
How did things go so wrong under Mullenberg’s 4-year tenure as the CEO and chairman of Boeing (3 years)? Why did he lie and say that Boeing’s planes were safe after two horrific crashes? Can investors trust that the C-Suite environment has been cleaned up enough to put the company on the right track? On the positive side, most of Boeing’s board of directors were appointed in 2019 and thereafter. Kelley Ortberg promises to root out the problems at Boeing and “restore the trust of our customers and meet the high standards they expect of us,” according to the Seattle Times. On September 20, 2024, the top executive at the space and defense division of Boeing was canned by Ortberg. However, Stephanie Pope, who oversaw aerospace between April 2022 and December 2023, remains the COO of Boeing and the president and CEO of Boeing Commercial Airplanes.
 
Even with the (mostly) new leadership, Boeing’s challenges will not disappear before more losses (hopefully limited to balance sheet and not lives) and bad news (like a credit downgrade) occur. The production halt is going to mean that Boeing’s trend of burning through cash is likely to continue through the end of 2024 (at least).
 
Why Does This Matter to Your Retirement Plan?
Why should you care whether Boeing gets downgraded? Many retirement plans and financial advisors offer DJIA-based funds because it is the most recognized index on Wall Street and purports to be the leading Blue-Chip Index. We’ve already seen how the Dogs of the Dow are muting the index’s performance compared to the S&P500 and the NASDAQ Composite Index.
 
The DJIA lost 55% in the Great Recession, and took years to crawl back to even. The S&P500 dropped almost -40% in just four weeks between Feb. 19 and March 23, 2020. When you wait for the headlines that something terrible has happened, it’s too late to protect your wealth. When you keep enough safe and diversified and rebalance your wealth plan at least once a year, you might even earn gains in recessions (as Nilo Bolden did, during the Great Recession).
 

https://www.youtube.com/watch?v=gMmsuT84S7E

What Can You Do?
A time-proven 21st Century plan would always have us keep a percentage equal to our age safe and diversify our at-risk (stocks, equities) investments. Now that we are responsible for our own retirement plans, it’s key that we do this properly. We might also consider underweighting the DJIA and leaning into the S&P500 for the large cap allocations in our plan. We could even consider adding a hot slice or two of the NASDAQ Composite Index, or a targeted Magnificent 7 fund.
 
This isn’t complicated. It’s actually as easy-as-a-pie-chart when you implement our time-proven 21st Century strategy. That’s why we call it the life math that we all should have received in high school and college.
 
Bottom Line
If Walgreens serves as an example, we might see Boeing get the boot from the DJIA and receive a downgrade from S&P Global. There are ifs in that sentence. Boeing has defied the naysayers and stayed in the DJIA for the past five years, through a lot of challenges that would have bankrupted most companies. It is possible that the debtors and investors will find creative ways to float Boeing until production is up and improved.
 
However, even if the analysts believe that the new Boeing board and CEO can clean things up and turn things around in 2025, Boeing has at least a few more quarters of bad results to get through – something that usually results in selling. (The 5-year low was $95/share, while the current price is still $156/share.) These are all reasons to seek a more diversified portfolio in our nest egg, and to know clearly where our hard-earned money is invested and why. With stocks trading at an all-time high, now is the ideal time to do this.
 
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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money and 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 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. 
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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.  

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