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Matt's Market Insights


Why is the Dow lagging the broader market?


The S&P 500, Russell 2000, and the NYSE Advance-Decline line are all reaching new highs but the Dow has failed to do so since December 31st of last year (chart below shows S&P in black and the Dow in blue). Some are seeing this non-confirmation as an ominous sign, but there's another perspective. Robert Sluymer of RBC Capital Markets points out that the stocks which make up the Dow are more defensive in nature than those in the S&P 500. He notes that cyclical growth sectors such as technology and consumer discretionary make up about 32% of the S&P but only 23% of the Dow. The Dow also has an average dividend yield of 2.6% compared to the S&P's 1.9%. This suggests that investors expecting economic growth may be more apt to put money towards S&P components rather than Dow components; it may be ... Log in or subscribe to continue reading.

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