Down No More – Dow Jones Industrial Average
In recent times, we’ve come to understand the market order when it comes to indices. The NASDAQ tends to be more volatile with large moves because it mostly tracks the tech sector. The S&P tends to be more in the middle, tracking stocks that represent the current economy, and it holding the middle ground makes it what most investors see as the best tracker of the overall market. Lastly, the Dow Jones Industrial Average tends to be the least volatile as it tracks blue chip stocks, and many investors divert their attention to the other two indices as a result. However, 2022 has shown that those who have been sleeping on the Dow might be regretting their decision.
2022 has been an unfortunate year for the markets, with many factors contributing to the indices all being lower than last year. However, the S&P 500 and NASDAQ are down 15 percent and 27 percent respectively, while the Dow Jones is down only 5.3 percent. This is the greatest the Dow has outpaced the S&P since 1933, when the country was going through the Great Depression. For the NASDAQ, it’s the greatest margin since 2000, when the tech bubble popped, and the NASDAQ cratered. If there’s a common theme here, it’s that the Dow is a lot safer during tough times, but it’s unfair to point the finger at just volatility. In 2022, we’ve seen that many economic decisions have been made, like the rapid rate hikes instituted by the Federal Reserve. These rate hikes have obliterated sectors like tech who generally perform worse, which has led to the demise of the S&P 500 and NASDAQ. Meanwhile, stocks like Chevron have powered the Dow, along with many other blue-chip names. The question is value versus growth for investors, and the current environment seems to bode well for the former. It’s necessary to mention that in positive spells like 2021, the Dow was far behind the other 2 indices. However, investment strategies need to shift as economic conditions shift, and those favor the Dow now.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.