The Dow-to-Nasdaq Ratio

Today the Dow closed at 10414.13 and the Nasdaq finished at 2091.24. That comes to a Dow-to-Nasdaq ratio of 4.9799. Yesterday, it was 5.0026. Basically, this is about as close to 5-to-1 as you get. That’s been the average Dow-to-Nasdaq ratio for the last 20 years, which leads me to think that the overall tech sector is fairly valued. The Nasdaq could certainly outpace the Dow over the next few months, but it’s unlikely to do so for long.
During the tech boom, the ratio went as low as 2-to-1 (for two days, it slipped just below 2.0). On the other end, in the summer of 2002 the ratio barely jumped above 6.6666 (making the Nasdaq 15% of the Dow).
Many people think that the Nasdaq has outperformed the Dow for many years, but it hasn’t. Over the last 18 years (today is the anniversary of Meltdown Monday), the Nasdaq Composite is up 480.6% while the Dow is up 498.9%.

Posted by on October 19th, 2005 at 7:19 pm


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