Please ensure Javascript is enabled for purposes of website accessibility

A Foolish Take: Why Isn't the Dow Setting More Records?

By Dan Caplinger - Jul 29, 2019 at 12:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A strong performance this year hasn't translated into many forays into uncharted territory.

The stock market has defied every naysayer over the past 10 years, with a powerful bull market that has helped disciplined long-term investors fully recover from the carnage of the financial crisis in 2008 and 2009. The Dow Jones Industrial Average (^DJI 0.03%) has quadrupled from its 2009 lows, and more recently, the benchmark has rebounded from a tough period at the end of 2018 to rise 17% year to date.

Yet if you haven't noticed the Dow getting a whole lot of positive press recently, you're not alone. One big reason is that even though the broader stock market has done extremely well in 2019, the Dow hasn't found itself at all-time highs all that much this year. For instance, the S&P 500 Index's (^GSPC 0.01%) record close on July 26 wasn't a record for the Dow, which remained more than 160 points below its most recent high.

As you can see below, the four record closes for the Dow this year stand in stark contrast to how many record closes the Dow has seen during other strong years. The performance in 2017 was most noteworthy in this respect, with the Dow's 25% rise during the year coming at a measured pace that was quite steady in its uptrend. There was some volatility in 2017, but the list of nearly six dozen record closes included many days in which the Dow made only small moves higher into record territory.

Graph showing daily record highs of Dow by year

Data source: S&P Dow Jones Indices. Chart by author. 2019 figures as of July 26.

There are a couple of factors at play that have hurt the Dow's record-making performance in 2019. First, the Dow had a big drop during the last part of 2018, falling more than 3,000 points in the final three months of the year. That forced the average to post a double-digit percentage gain before it could even get back to its previous high-water mark. Second, several highly weighted stocks in the Dow have had subpar returns compared to the broader market, with industrial and healthcare stocks suffering from nervousness about potential future regulation and global macroeconomic issues.

Record highs aren't important in themselves, but they provide a psychological boost to investor sentiment. The gains so far this year are surprising in part because there have been so few record closes to get the attention of those who don't follow the investing world day in and day out.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,261.90 (0.03%) $8.77
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,901.36 (0.01%) $0.57

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.