Happy birthday, Dow! Being 130 years old doesn't make it too antiquated to follow.

By Tomi Kilgore

The Dow has underperformed the S&P 500 by a wide margin recently, but over the long term they match up very well despite their differences

The Dow turns 130 years old, and despite its recent underperformance, it still remains relevant to most investors.

There's a tendency for some to scoff at anything that tries to stay relevant for more than a century, but the Dow Jones Industrial Average continues to do just that.

When the average person asks how the stock market did on any given day, they usually want to hear how many points the Dow DJIA gained or fell, and not so much how many percentage points the S&P 500 index SPX moved.

"Despite its limitations, the Dow still captures how people 'feel' about the market, particularly when they're watching the evening news," wrote Anthony Saglimbene, chief market strategist at Ameriprise, in emailed comments to MarketWatch. "With only 30 well-known companies, it functions more like a curated snapshot of corporate America than a comprehensive measure of it. In our view, it's a key reason why the index has endured for so long."

Many may argue, and recent data suggests, however, that the Dow has lost its touch. The index, which turned 130 on Tuesday, has recently underperformed the S&P 500 by the widest margin in decades, by some measures.

It's no wonder, as the sectors with the biggest weightings in the Dow are financials at 27.2% and industrials at 18.4%, as of April 30. The information-technology sector, which includes the red-hot chip subsector, is just 17.1% of the Dow, or less than half its 35% weighting in the S&P 500.

That helps explain why the Dow is up 1.9% over the past three months, while the S&P 500 has rallied 8.8%. On a rolling three-month basis, the underperformance topped 8 percentage points earlier this month for the first time since April 2000, just as the dot-com bubble was popping.

"I never look at the Dow industrials," Mark Arbeter, president of Arbeter Investments, told MarketWatch, and a big reason for that is because it's price-weighted. That means stocks with higher prices have more influence on the Dow's price than those with lower prices, regardless of their market values. In contrast, the S&P 500 and the Nasdaq Composite COMP indexes are market-capitalization weighted, meaning shares of companies that are valued more have more influence than those with lower market caps.

But even though the Dow has lagged the S&P 500 for a while in the current environment, it "surprisingly" still tracks that index "pretty well," and can even outperform over certain stretches, he said.

Yet on the Dow's birthday Tuesday, the S&P 500 rose 0.6% to close at a record high, led by a surge in chip maker Micron Technology's stock (MU), while the Dow fell 118 points, or 0.2%, as shares of health insurer UnitedHealth Group (UNH) were the biggest drag.

Hamish Preston, head of U.S. equities at S&P Dow Jones Indices, which is the keeper of the Dow industrials, said this recent relative weakness has led some to call the Dow an "antiquated benchmark." But he noted the indexes have diverged for periods of time before, in both directions, but have always evened out over time.

The correlation coefficient between the Dow and S&P 500 over the past 40 years, as well as over the past year, is 0.99, according to a MarketWatch analysis of FactSet Data. A reading of 1.00 would mean they move exactly in sync. But just in 2026, that correlation has dropped to 0.81, which is pretty close to the correlation between Nvidia's stock (NVDA) and the Roundhill Magnificent Seven ETF MAGS of 0.85.

While the Dow has recently trailed the S&P 500 by the widest margin in 26 years, the Dow beat the S&P 500 by an even wider margin - by just under 9 percentage points - in December 2022, when inflation was taking a toll on investors.

In fact, the biggest percentage divergence in performance between the indexes over the past 30 years was during the dot-com bubble time of May 1999, when the Dow actually outperformed the S&P 500 on a rolling three-month basis by more than 11 percentage points.

Preston pointed out that despite the periodic divergences and the Dow's old-school image, the index has actually changed dramatically over the decades so as to "reflect and capture" the stock market's trends.

When it was launched on May 26, 1896, it had just 12 components, but now there are 30. There have been 136 changes made to the index in its 130-year history. And as the Dow first crossed above 50,000 in February - it remained above that threshold on Tuesday - less than two years after it passed 40,000, half the companies that contributed to that 10,000-point move were added to the Dow in the past 30 years.

Perhaps the key reason the Dow has maintained its relevancy is because of its long history, Preston said, because people can see how the stock market, and the world, has changed over the years. In contrast, the S&P 500 isn't quite 70 years old yet, as it was launched in 1957, so investors can only estimate how it would have performed during the world wars and the Great Depression.

So even though the Dow hasn't quite captured the artificial-intelligence boom this year, it will likely eventually reflect and capture the new trend.

"The Dow is less about precision and more about perspective," wrote Ameriprise's Saglimbene. "It's a historical lens on U.S. corporate leadership, and while professionals rely on broader measures, the Dow remains the public's most enduring shorthand benchmark."

-Tomi Kilgore

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05-26-26 1631ET