The Dow Jones Industrial Average, considered one of the main barometers of U.S. stock market performance, topped 50,000 points on Thursday. The index rose 0.6% in early trading after strong earnings from index constituent Cisco and the start of important diplomatic meetings between the United States and China.
But if you’re an everyday investor, a 50,000-point Dow probably doesn’t mean much, says Todd Rosenbluth, head of research at investment research firm TMX VettaFi.
First, the market constantly makes new highs and achieves new “point” milestones. The Dow hit 40,000 points in May 2024 under former President Joe Biden. The US market has historically been on an uptrend, and it is becoming increasingly easier to reach new plateaus. Over the past 20 years, the Dow has risen an average of 7.8% per year. At this rate, the number is expected to exceed 70,000 by 2030 and 100,000 by 2035, according to a February analysis by investment firm Raymond James.
For most investors, Rosenbluth said, Dow points are less important to consider than the percentage change in investment value, which is much more likely to track a modern index such as the S&P 500.
“It’s good every time the market goes up, but the round numbers are just as good as they look,” he says. “More importantly, did the money you invested grow at the rate you expected against your financial goals?”
The Dow reached the 50,000-point level for the first time in February, and the index’s performance quickly became a talking point for President Donald Trump and his administration.
On February 11, former Attorney General Pam Bondi cited this milestone during a House Judiciary Committee hearing, dodging questions about the handling of the Jeffrey Epstein file in order to accuse Democrats of ignoring stock market interests. Two weeks later, the index subsequently fell, but President Trump claimed in his State of the Union address that the index had topped 50,000 primarily because of his administration’s tariff policies.
Some experts argue that the market is rising despite President Trump’s tariffs, not because of them. But President Trump said in his speech that the Dow’s milestone was a clear signal to his administration that the economy was “stronger than ever.”
Why experts say many investors can ignore the Dow Jones Industrial Average
Before viewing the Dow’s rise above 50,000 as an unprecedented success for the “market,” experts say you should consider the broad range of stock market investments you actually own.
If you own a mutual fund or exchange-traded fund that tracks the overall stock market, you may not be tracking the Dow Jones Industrial Average. By far the most popular broad US stock market benchmark among individual investors is the S&P 500. The three largest ETFs on the market each track the S&P directly and hold portfolios worth between $700 billion and $900 billion, according to ETF data site ETFdb.com. The largest fund tracking the Dow has about $44 billion in assets.
The reason lies in the way the index is constructed. Founded in 1896, the Dow is the oldest index in the United States, with a portfolio of just 30 stocks overseen by three representatives from S&P Dow Jones Indices and two representatives from the Wall Street Journal. The committee selects stocks based on subjective criteria such as a company’s reputation and interest in the company among investors.
As a result, the Dow tends to be made up of financially mature, well-known companies, said Zachary Evens, management research analyst at investment research firm Morningstar.
“The committee is trying to capture the 30 most important companies to the U.S. economy. These are ‘blue chip’ names like Caterpillar, Microsoft, Home Depot, Visa and McDonald’s,” he says.
The Dow Jones Industrial Average is weighted by price. This means that the highest-priced stocks, rather than the biggest companies, get the biggest slot in your portfolio. Goldman Sachs and Caterpillar currently occupy the top two spots on the Dow.
The S&P 500 takes a more quantitative approach and roughly includes the 500 largest publicly traded companies in the United States, weighted by market capitalization, which is determined by multiplying a stock’s price by the number of shares outstanding.
“The S&P 500 is a more accurate barometer of the U.S. market than the Dow because it represents a larger portion of the market and is weighted by market capitalization,” Evens says. “Market capitalization also better reflects the actual size of a company (than stock price), so it’s a better way to not only understand more of the market, but also to get a more accurate picture of what’s going on in the U.S. stock market.”
S&P tracks more companies than the Dow and is weighted by actual company size rather than stock price, Evens said. As a result, S&P has become a more popular benchmark for professional investors and, more recently, a more lucrative stock for individual investors. Missing from the Dow’s holdings are Nvidia, Alphabet, Amazon.com and Alphabet, which are some of S&P’s biggest holdings that have driven the index’s performance over the past few years.
Dow still has fans. The largest ETFs focused on the Dow have loyal followings, and funds that track other versions of the index, such as funds with even shares or funds that prioritize high-dividend companies, may be better suited for investors interested in blue-chip companies or stock income, Rosenbluth said.
But over the past 15 years, investors in the S&P have earned an annualized return of 14.1%, compared to an 11.9% return for the Dow.
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