Explainer: More records for Nasdaq as Dow struggles with losing streak
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A big divergence is going on in the markets, where value stocks are taking a back seat to growth. While it’s been pronounced for much of the year, things really kicked off in the aftermath of the U.S. presidential election. Fresh highs keep being notched by the Nasdaq (COMP:IND), which recently crossed the 20,000 milestone and inked its 38th record close of the year, compared to the Dow Jones Industrial Average (DJI), which just posted its longest losing streak since 2018.
Bigger picture: Tech stocks are getting another boost amid the outlook for interest rates, as well as the staying power of artificial intelligence and enthusiasm over crypto. New AI favorites like Broadcom (AVGO) recently joined the $1T market cap club and Michael Saylor’s MicroStrategy (MSTR) was just added to the Nasdaq 100 (NDX), helping propel the overall composite index by 35% YTD. On the other hand, the Dow (DJI) has faced challenges from several of its constituents in the healthcare, energy and industrial sectors.
To clarify, the blue-chip Dow (DJI) is still up 17% in 2024, which is an impressive return on a historical basis. All indications suggest that U.S. stocks are still the place to be for investors in 2025, as political and economic trouble hits many Western nations, from France and Germany to South Korea and Canada. Many are also betting on the policies of the incoming Trump administration, whose stance on deregulation, tax cuts and efficiency could point to a resilient economy.
SA commentary: “Continuing high rates versus those which we enjoyed (and needed) during the aftermath of Great Recession and the pandemic are perceived to be a big risk for the economy,” Seeking Alpha Analyst Bill Kort wrote in a new article. “When Chairman Powell talks about going slow on raising rates, those unwarranted fears are reinforced and money exits the economically sensitive areas and continues to pour into that which is perceived not vulnerable (of course, eventually it will be): technology. As it is with everything stock market and cyber currency, higher prices seem to create demand, with the converse – lower prices – creating supply.”