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Key takeaways
- The Dow Jones posted its 17th record close of the year yesterday, ending the session above 48,000 for the first time ever.
- The 30-name blue-chip index has outpaced the Nasdaq and S&P 500 over the past two trading sessions — and over the past month.
Long live the Dow Jones: It’s the oldest of the three major stock market gauges — and usually the least ostentatious — that’s getting a wheelie these days.
The Dow Jones Industrial Average rose above 48,000 for the first time on Wednesday, marking its 17th record close of the year. Although its rise has lagged behind the S&P 500 and Nasdaq Composite indexes year-to-date, it has outpaced the two tech-heavy indexes in recent sessions and last month. It’s also taking less of a hit amid today’s market hemorrhage.
The Dow’s 30-component segment of the stock market has performed better recently as investors took some of the AI shine out of their eyes and pulled back from some of the technology stocks that led much of the rally this year. Some investment professionals say the Dow’s recent outperformance could continue as investors begin to notice that there are other things to invest in besides big tech.
Why does this matter to you?
Technology stocks have done a lot of work this year as broad market indexes hit record highs. For investors anticipating a pullback, they may find more opportunities in high-value, high-quality stocks.
Meanwhile, concerns about valuation persist. “Technology stocks are trading at 45% above the forward multiple for the rest of the market,” said Eric Thiel, chief investment officer at Comerica Wealth Management. “We believe the less technology-focused Dow Jones is likely to continue to outperform the S&P 500, given the relative disparity in valuation.”
The best-performing stocks in the Dow so far this year aren’t exactly AI companies, but they’re not traditional tech stocks either: Caterpillar (CAT) shares are up 53% on a data center play, while Goldman Sachs (GS) is up 44% over the same period, along with other big bank stocks.
“We’re seeing a classic rotation,” said David Miller, CIO and portfolio manager at Catalyst Funds. “Investors are getting some gains in big tech after a long AI-driven rally and a reallocation towards more affordable sectors including industrials, financials, energy and healthcare.”
“The Dow Jones 48,000 is more of a psychological indicator than a fundamental one,” he said. “But it indicates that the market is expanding.”
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