Denis Anumudu on LinkedIn: The Dow Is a Terrible Index. But It Is Telling Us Something Important. (2024)

The Dow Jones Industrial Average was the first major index to fully recover from the 2022 sell-off this week and reach a new all-time-high.The Nasdaq has gotten most of the headlines this year – being up +40% will do that.But . . . it was down -33% in 2022, so it’ll take a roughly +50% performance for it to fully recover.I like to call this “reverse compounding” – when big drawdowns take exponentially large recoveries to recapture all-time-highs (see table).Meanwhile, the boring old Dow (30 blue-chip companies) was only down -9% in 2022, so a much easier recovery path.As the old saying goes, “if investing feels exciting, you’re doing it wrong.”

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I could speak for hours on the DJIA / S&P 500 relationship but will be brief here...The DJIA is a much better market indicator than the S&P 500 -- no question about it -- as its allocations are closely aligned with the actual market, as determined by GDP. The S&P 500 is over-weighted in technology (as defined by GDP), which is the reason it has outperformed the DJIA over the last 15 years. And because it is tech-heavy, the S&P 500 is more properly compared to the NASDAQ 100. Indeed, the managers of the DJIA -- S&P Global -- have assembled an inferior collection of mediocrity. That's one thing -- but not the thing. The DJIA's objective is to indicate the average direction of stocks via a market diversified portfolio as defined by GDP -- something it does much more accurately than the S&P 500. And that, by no means, makes it "terrible." One more thing...as with much of industry propaganda, the author of this article throws darts at the Dow's size, just 30 stocks, as if that is a reason for its underperformance. That's a joke and defies all laws of science and mathematics, as proven by my method that achieves market diversification and superior performance with just 15 stocks. Happy to explain in more detail to anyone.Cheers

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In his book titled “Dow 40,000: Strategies for Profiting from the Greatest Bull Market in History”, financial advisor and author David Elias predicted in 1999 that the Dow Jones Industrial Average Index (^DJIA) would reach 40,000 by year 2016. History proved the lofty projection wrong, and Dow wasn’t even halfway through by 2016, thanks to the dot-com bubble burst and the financial crisis of 2008. Twenty-five years later, Dow is still shy of the historic 40,000 milestone by more than a percent point. How has the journey been so far?1896: Dow Index was established with a closing value of 40 by year-end1972: Dow reached 1000 for the first time1995: Dow tops 50001999: Spectacular hype pushed Dow above 100002017: Dow rides the post-election rally to cross 200002020: Pandemic didn't stop the Dow from breaking 30000 mark2024: Dow is flirting with the historic 40000 levelWhat does it mean to investors like us? First: despite its popularity and historical significance, DJIA isn’t a useful Index to follow. Second: past trajectory doesn’t predict short-term future performance. Third: a well-diversified, low-cost stock portfolio is still the best bet for generating long-term wealth. We might as well just turn off the noise and keep investing regularly.

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Dow hits 37,000 for the first time.A big day for investor confidence in a soft landing for the economy. We’ve definitely seen a Q4 upswing in deal count and investor activity!Just in time for the end of the year.Could Q1 shape up to be big for new technologies and early-stage investment? I think so, at least compared to the last 12 months!https://lnkd.in/dV63aXqg

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Historic Milestone Alert! The Dow Jones Industrial Average has just surpassed the 40,000 mark for the first time since its inception in 1896. This landmark achievement underscores the resilience and potential of our economy. Let's discuss what this means for investors and the broader economic landscape. #DowJones #EconomicGrowth #Investinghttps://lnkd.in/eCYhHJr2 Dive deeper into what the Dow consists of and its significance.

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All of us who are investors know about the Dow Jones Industrial Average, whose daily up or down moves are usually the first number you hear or see in daily stock market reports.But even though the Dow has what is probably the greatest mindshare of any market metric, its financial market share is minuscule compared with the trillions of dollars indexed to the S&P 500 index, created more than 70 years after the Dow was

Weekly Market Update - 12/29/2023 For the Week: S&P 500 4,770 +0.3%; NASDAQ 15,011 +0.1%, Dow Jones Industrial Avg 37,690 +0.8%For the Year: S&P 500 +24.2%, NASDAQ +43.4%, Dow Jones Industrial Avg +13.7% Top Interesting Market Events...

📉 Today, a significant shift occurred in the financial landscape as the Dow Theory issued a notable SELL signal.📊 The Dow Industrials concluded the day at 32,936.41, breaching its October 3, 2023, closing lows of 33,507.50. This confirmation follows the earlier breakdown in Dow Transportation on October 18, 2023, signaling a bearish trend.📈 Historical data from 1953 reveals that post a Dow Theory sell signal, the market often experiences an average additional decline of 11.81% before finding its final bottom. For a deeper dive, you can explore the details in the link given in the comments section below.🔍 This SELL signal points towards the potential for further downside in the market's price action. Investors and analysts are encouraged to stay watchful and prepare for potential challenges ahead.As an aside, our own Dow Theory variation, the Dow Theory for the 21st Century, triggered a SELL on 10/20/23, which allowed us and our Subscribers to exit at a slightly better price.#technicalanalysis #trendfollowing#DowTheory #FinancialMarkets #InvestmentAnalysis #MarketTrends #StockMarketInsights #InvestorAlert

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Weekly Market Update - 12/29/2023 For the Week: S&P 500 4,770 +0.3%; NASDAQ 15,011 +0.1%, Dow Jones Industrial Avg 37,690 +0.8%For the Year: S&P 500 +24.2%, NASDAQ +43.4%, Dow Jones Industrial Avg +13.7% Top Interesting Market Events...

Dow Theory Suggests a Broader Market Rally in the USWhat is the Dow Theory? The Dow Theory is a trading approach that is developed by Charles Dow, who along with Edward Jones founded Dow Jones & Company, Inc. where they developed the Dow Jones Industrial Average in 1896. One of the six main tenets of the theory notes that for a trend to be established, indices must confirm one another. This means that a bullish signal in one index must be confirmed by a corresponding bullish signal in the other.In January 2023, the Nasdaq Composite or the IXIC, S&P500 Index or SPX, and even the Dow Jones Transportation Average Index or the DJT appeared to have signaled a turn to the upside. The upside break from a supposed bullish reversal then, however, was not confirmed by a corresponding turn in the Dow Jones Industrial Average or the DJI. The absence of buying in this index tells us that positive sentiment towards the 30 biggest industrial companies remain lacking, suggesting that the sector’s health was not yet as promising. And as we can observe, the non confirmation of the DJI led to a lack of follow through in the supposed turns of the IXIC, SPX, and DJT. It took several months after for these indices to rebase and pivot again which they did in May. Just this month, for the first time in the year, we finally see the DJI clearing a notable pivot point and finally confirming the move of the other indices. With all the key indices mentioned above, the market leading Nasdaq and SPX, the Dow Transports, even the small caps represented by the Russell 3000, and now the biggest industrials turning, we can possibly see a more broadbased and sustainable rally in the US equity space. At least that’s what Charles Dow would have said.https://lnkd.in/g-rN_Hv7#IXIC #SPX #DJI #DJT #RUA

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