Key Takeaways
- The Dow posted its 17th record close of the year yesterday, ending a session above 48000 for the first time ever.
- The 30-name index of blue-chip stocks has outpaced the Nasdaq and the S&P 500 over the past two trading sessions—and over the past month.
Long live the Dow: The oldest of the three major stock-market barometers—and, usually, the least ostentatious—is popping wheelies these days.
The Dow Jones Industrial Average rallied above the 48000 level for the first time on Wednesday, posting its 17th record close of the year. And though its rise has lagged the S&P 500 and the Nasdaq Composite year-to-date, it has outpaced the two tech-heavy indexes in recent sessions and the past month. It’s also taking less of a hit amid the market bleed today.
The Dow’s 30-constituent slice of the equities market is faring better lately as investors rub some AI glitz out of their eyes and pull back from some of the tech stocks that have led much of the year’s rally. Some investment pros say the Dow’s recent outperformance could continue as investors start to notice that there are other things to invest in besides big tech.
WHY THIS MATTERS TO YOU
Tech stocks have been doing a lot of the legwork this year as broad market indexes notch record highs. For investors anticipating a pullback, they may find more opportunity in value and high-quality stocks.
Meanwhile, valuation concerns continue. “Technology stocks are trading 45% above the forward multiple of the rest of the market,” said Eric Teal, chief investment officer for Comerica Wealth Management. “We believe the less tech-centric Dow index is likely to continue to outpace the S&P 500, given the relative valuation disparity.”
The top performers in the Dow so far this year aren’t exactly non-AI, but they aren’t traditional tech stocks either: Caterpillar (CAT) has climbed 53% on the premise that it’s a data-center play, while Goldman Sachs (GS) is up 44% over the same period, alongside other major bank stocks.
“We’re seeing a classic rotation underway,” said Catalyst Funds CIO and portfolio manager David Miller. “Investors are taking some profits in mega-cap tech after an extended AI driven run and reallocating toward more reasonably valued sectors including industrials, financials, energy, and healthcare.”
“Dow 48000 is more psychological than fundamental,” he said. “But it signals that the market is broadening out.”