The Dow’s underperformance can be attributed partly to its nature as a price-weighted index. Unlike the S&P 500 and Nasdaq Composite, which are weighted by market capitalization, the Dow gives more influence to higher-priced stocks like UnitedHealth Group, impacting its overall performance more than tech giants like Apple and Microsoft.
In 2024, the Dow Jones Industrial Average lags significantly behind other major indexes, with the S&P 500 outperforming it by 12.65 percentage points as of Tuesday. This gap is near historic levels, echoing the 12.8 percentage-point difference recorded last year.
The S&P 500’s gains, driven largely by megacap tech stocks, highlight the discrepancy. From October 2022 to June 2024, the S&P 500 saw a 55% total return, with 60% of that coming from just 10 stocks, noted Ronald Temple of Lazard Asset Management. Despite expectations for a broader rally in 2024, the market remains tech-centric.
The divergence isn’t limited to the Dow and S&P 500; even the S&P 500’s equal-weight version trails the regular index, up only 3.9% compared to 16.9% for the standard index. This performance spread is reminiscent of the dot-com bubble peak in 2000, as pointed out by Bespoke Investment Group analysts.
Skeptics suggest that a rotation away from megacap stocks could help lagging sectors catch up, potentially stabilizing or lifting the broader market.
John Paul is the founder of DayTradeToWin, a trading education and software platform established in 2008 with thousands of members worldwide. He specializes in price action-based futures trading strategies and structured market analysis.
DayTradeToWin provides trading education, indicators, and software tools designed to help traders apply disciplined, rule-based price action decision-making across global futures markets.
John Paul is the creator of several trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, used by traders to identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC).
Official website: https://daytradetowin.com
