Dow Jones took the lead in fight against NASDAQ Composite
The Dow Jones Industrial Average outperformed the NASDAQ Composite index by 6.21% in March 2021. This is a record monthly gap since February 2002.
March comes like a lion and goes like a lamb. This is how we can characterize the end of trading for the Dow Jones Industrial Average index at the end of March. The US blue-chip Dow Jones index has posted a record monthly lead over the NASDAQ Composite index in almost a decade.
The Dow Jones index added 6.62% in March, compared with a slight increase of 0.41% in the NASDAQ Composite index of technology companies for the same period. The S&P 500 index also showed a significant increase of 6.6% in March.
According to Dow Jones Market Data, the Dow Jones outperforming the NASDAQ Composite by 6.21% represents a record monthly spread between the major U.S. stock indexes since February 2002.
The Dow Jones Industrial Average has a nearly 125-year history. By such a large monthly margin, it has managed to outperform the NASDAQ Composite index only 19 times since the creation of the NASDAQ Composite Index of technology companies in 1971.
It is worth noting that, according to experts analyzing Dow Jones Market Data, a similar trend is expected to continue in April in relation to the average dynamics of the main US stock indices.
Against the background of the outperforming dynamics, the Dow Jones index on average rose by 0.72%, and the NASDAQ Composite index on average fell by 0.72%.
The Dow pulled ahead in March as benchmark U.S. treasury yields rose, helping the Dow to catch up, posting a 7.8% gain since the start of 2021, compared with a 5.8% gain in the NASDAQ Composite index. Nevertheless, the NASDAQ Composite index still holds the lead for 2020, showing an increase of 72% compared to the growth of 50% of the Dow Jones index.
Because the NASDAQ Composite index mostly includes technology stocks and technology-focused stocks, the index is more sensitive to a sharp rise in borrowing costs, a sign of rising revenue.
Investors were forced to rethink the risk / reward ratio when trading further with shares of American high-tech companies, among which there was a real boom in the midst of a deadly pandemic. Some investors are looking at other sectors as alternatives for investment, including assets that could outperform the growth of tech stocks in more favorable economic times.
The spread of the COVID vaccine and trillions of dollars in budget spending are expected to accelerate the US economy's recovery from the deep crisis associated with the coronavirus pandemic and lead to higher interest rates, which will put additional pressure on the shares of high-tech companies.
Meanwhile, it is worth noting that recent events show that April is generally considered a favorable month for stock growth. According to the chief investment strategist of LPL Financial, Ryan Detrick, in April, the shares of American companies showed rapid growth in 14 of the last 15 years. According to an analyst at LPL Financial, April was the most favorable month for stock growth in the last 20 years and the second best month since 1950.
However, MarketWatch columnist Mark Halbert warns that investors should not get too hung up on seasonal trends. According to the observations of Mark Halbert, until 2000, the dynamics of the US stock market in the April months were not always so rosy.
"In fact, when we analyze all the years that have passed since the creation of the Dow Jones index in the late 1800s, we can not conclude with 95% certainty that the data on the US stock market at the end of April will somehow differ from the average," said Mark Halbert.