Even though the Dow Jones Industrial Average (DJIA) rallied to record a high earlier this month, investors’ discomfort with President Biden’s proposal to raise the capital gains tax has caused a pullback in the index. In addition, the resurgence of COVID-19 cases could push the DJIA into a downtrend in the near term. Against this backdrop, we think it's best to avoid relatively overvalued DJIA stocks, such as The Walt Disney Company (NYSE:DIS), Chevron Corporation (NYSE:CVX), and The Boeing Company (NYSE:BA).After rallying to a record high earlier this month, the Dow Jones Industrial Average (DJIA) declined 1.3% to close yesterday’s trading session at $33,815.90. Investors’ concerns over Biden’s proposed capital gains tax hike on the wealthy may have caused the index to lose some of its value. The proposal to almost double the capital gains taxes could lead to a further downtrend in the coming days.
In addition, the resurgence of COVID-19 cases in several parts of the world has kept investors on their toes. Amid this environment, we think it could be wise to avoid companies with declining financials and lofty valuations.
Some DJIA stocks have been suffering significant losses, and their premium valuations do not justify their financial performance or growth prospects. Hence, we think it’s best to avoid overvalued stocks The Walt Disney Company (DIS), Chevron Corporation (CVX), and The Boeing Company (BA) for now.