Dow 12,000: Better Late Than Never

The Dow Industrials hit 12,000 earlier this morning and is still seeking to close about that level for the first time since June 19, 2008.

At 12,000, the Dow is now up 23.88% since the markets hit their 2010 lows on July 2.

But talk about being late to the party. Take note that the other major indices accomplished their equivalent of Dow 12,000 quite a while ago (i.e., up 23.88% from their own July lows). The S&P crossed that threshold on the first trading day of the year (January 3) while the Nasdaq attained a comparable gain way back on December 3.

Overall, since July 2, while the Dow is up nearly 24%, the S&P 500 is up 26.68% and the Nasdaq is even stronger – up 30.87%. Keep in mind, the S&P is also approaching its own milestone of 1,300, a level that it hasn’t closed above since August 28, 2008.

So what’s behind the Dow’s underpeformance relative to the S&P? On closer examination, the Dow and S&P’s returns tracked each other pretty closely until mid-October. From July 2-October 14, Dow was up 14.54% and the S&P was up 14.79%. But from October 15 onwards, the Dow has underperformed the S&P, rising just 8.35% vs. the S&P’s 10.20% gain.

A couple of factors are likely contributing to the Dow’s underperfomance:

  1. Compared to the S&P 500, the Dow is heavily underweighted in financials and slightly underweighted in energy and tech stocks. Each of those sectors have been the three best-performing S&P sectors since October 15.
  2. On the flip side, the Dow is overweight both telecom and consumer staples stocks compared to the S&P. Those 2 sectors have been notable laggards since October 15.

>> Winners and Losers Since Dow Last Hit 12,000

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