Now the Dow Is Beating the S&P 500

In January, I noted that the Dow Jones Industrial Average had missed the rally. The index had significantly underperformed the S&P 500.

Now the S&P 500 is the one that’s lagging. The Dow has already passed its pre-quake high from mid-February while the S&P 500 is still trying to clear that hurdle. Yesterday, the Dow had its highest close since June 5, 2008. That was the last time the Dow had closed over 12,500.

The index first closed above 1,250 on September 26, 1983. The index first closed above 125 on March 3, 1925. That was the day before Calvin Coolidge was inaugurated. He became president after Harding’s death and then won the election in 1924.

Why is the Dow doing better? Part of the reason is regression to the mean. Better earnings from companies like Johnson & Johnson ($JNJ) are helping those stocks that have weighed down the Dow. Also, the Dow doesn’t have as many cyclical stocks as the broader market, so when cyclicals begin to suffer, the Dow will outperform.

Posted by on April 21st, 2011 at 10:29 am


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