Dow Jones Industrial Average (DJIA) or Dow 30 is up by over 20% from its September lows. The Dow 30 index is exhibiting a spectacular comeback from its lows, in contrast to the S&P 500 and Nasdaq 100, which are still struggling to hold ground. The S&P 500 has increased by almost 3.76% over the last three months, while the tech-heavy Nasdaq 100 has declined by nearly 0.86 percent.
Dow has returned to almost the same levels of 34430 seen one year ago. The S&P 500 and Nasdaq, on the other hand, are still down 10% and 23%, respectively, over the 12-months period. What it shows is a clear divergence in the performance of Dow 30 compared to S&P 500 and Nasdaq, especially over the last 1-year period.
In 2022, rising rates have had a significant negative impact on Wall Street stocks. The valuation of some prominent equities has seen a significant decline due to the deteriorating macroeconomic fundamentals and the impact on company sales and revenues.
The structure of the indices and the index constituents could be the reason for the varying performance of the indexes during the same time period.
The Dow 30 index consisting of the top 30 blue-chip companies is a barometer of the US economy, its businesses, and the consumption trends in the country. Dow 30 is a leading US stock market index and represents the companies that are based only in the US.
According to the S&P indices website, a stock is included in the index only if the company has a great reputation, exhibits consistent development, and is of interest to a wide number of investors. In contrast to other indices, the Dow 30 selection is not limited by quantitative principles. Effectively, the index is calculated by taking the average stock price of the 30 companies that make up the Dow 30.
Some of the prominent companies in the 30-stocks index are Boeing, Nike, Goldman Sachs, Walmart, Intel, 3M, UnitedHealth Group, Apple, Coca-Cola, McDonalds, Microsoft etc.
In contrast, the Nasdaq 100 index is heavily weighted toward technology companies and includes companies like Microsoft, Apple, Amazon, Alphabet (Google), Meta (Facebook), Intel, Cisco Systems, Comcast, Pepsi, Tesla, Nvidia, Adobe, and Paypal. The top equities shared by both indices are Apple, Microsoft, Amazon, and Alphabet.
Also Read – US Stock Market: 10 highest market cap companies
How the Dow 30 performs in 2023 remains to be seen. It is anticipated that the US will experience a recession in the first half of 2019 and that the terminal Fed Fund Rate will be around 5%, which will affect how much it costs for people and businesses to borrow money. Another aspect that will affect investors’ stock market returns in 2023 is about the level of inflation from the current level of roughly 7.7%. Finally, investors must be mindful of the possibility that a pause or signals from the Fed regarding a rate cut in 2023 could result in pleasant surprises for Nasdaq stocks.