Why the Dow Is Crushing the Global Stock Market

The Dow Jones Industrials (DJINDICES: ^DJI  ) have put in extraordinarily strong performance so far this year, rising about 15% in 2013. What many U.S. investors don't realize, though, is how much the Dow has outperformed more global benchmarks of stock markets around the world.

Get to know the Global Dow
The Dow includes 30 of the most influential U.S. companies in the global economy. But if you want to get an even better measure of how the world stock market is performing, then turning to the Global Dow gives you a broader perspective. The Global Dow includes 150 stocks, each of which gets equal weight rather than price-based weighting. You'll find all 30 of the Dow Industrials in the Global Dow, along with some of the stocks that show up in the Dow's Transportation and Utility Averages as well.

With so many of the U.S. Dow averages' components, it's not surprising that U.S. stocks make up 42% of the overall Global Dow. But Japan represents about 10% of the average, and countries in Europe together compose more than 30%.

Within the Global Dow, you'll find plenty of international leaders, including Swiss food giant Nestle, British telecom Vodafone, and Brazilian mining company Vale. Financial stocks make up the best-represented sector of the Global Dow at about 17%, but the average is fairly well spread out across major sectors, with six different industry groups having 10% or greater representation in the average.

Why the Global Dow has fallen behind
So far this year, the Global Dow is up only about half as much as the Dow Industrials. Although U.S. investors tend to focus on the uncertainty with the Federal Reserve's policies as being most important to their domestic investments, global concerns elsewhere have had a much bigger negative impact on markets abroad. In particular, the plunge in the value of the yen has created a flight to the U.S. dollar, with dollar strength weighing on the returns of foreign stock markets for U.S. investors. Although Japan's stock market has launched higher because of the weak yen, emerging markets have suffered declines as their lightning-fast growth rates have slowed.

Moreover, Europe continues to be a cause for concern, as Turkey joined the list of countries in the region that have shown signs of destabilization. Turkey doesn't use the euro, but it nevertheless is strategically placed and represents an important bridge to the Middle East and Russia. Until investors become convinced that Europe can solve its systemic issues and move out of recession, it's likely to lag behind the U.S. and its more robust expansion.

Time to diversify?
For international investors, weak stock markets might well offer a great opportunity. As stocks in the U.S. appear increasingly overpriced, beaten-down international stocks are a better value. For instance, European energy stocks BP (NYSE: BP  ) and Total (NYSE: TOT  ) haven't done as well as their U.S. counterparts, even though they both have similar global exposure to energy assets around the world. When you think about investing, don't ignore the Global Dow, despite the Dow Industrials' stronger performance recently.

If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.


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  • Report this Comment On June 16, 2013, at 9:55 AM, ImAwake wrote:

    The Stock Market is rigged. Anyone who trusts the CRIMINALS running Wall Street is setting themselves up for a huge disappointment.

  • Report this Comment On June 16, 2013, at 11:40 AM, RHO1953 wrote:

    The Fed is pumping hundreds of billions into the market. It is a rigged game, another monstrous transfer to the billionaires. When the crash comes those guys will already have taken their money and the little guy will be left holding the bag.

  • Report this Comment On June 19, 2013, at 8:59 AM, FoolsGoldETF wrote:

    After suffering with precious metals for the past 4 years, I also believe that gold is just as rigged and manipulated as the stock market. Yeah, I got sucked into the hype. I am what you'd call a MoMo investor. Gold is NOT a safe haven!

    There is no metaphysical quality about gold that makes it impervious to the machinations of man. It is riding on a potent mythology and that is getting threadbare.

    What makes gold and silver so appealing is the Cargo Cult belief in it. The myth got its basis from the days when gold's value was regulated by law. Especially via the New Deal.

    Gold and PM's are hostage to a few refiners, major buyers, and the capriciousness of a rigged and immoral market. The fact that gold and silver are being bought and held by the Little People is proof that the bull market is over for it.

    Yes, the Big Boyz are running up the DJIA with stolen money. It won't be long before they'll start unloading on the Little People and who can the LP's sell to? That's when the DJIA will be struggling and shriveling, just like gold.

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