Why the Dow Jones Industrial Average Has Avoided the Bear So Far

On the day when the S&P 500 fell 20% from its highs, the Dow remained the relative outperformer.

| More on:
A large brown grizzly bear follows a male hiker who walks along a path littered with leaves in the woodest forest.

Image source: Getty Images

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

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Stocks continued their descent on Monday, building on dramatic losses from Friday after the latest inflation report showed greater price increases than anticipated. Losses for the Dow Jones Industrial Average (DJINDICES: ^DJI) were roughly in line with Friday's performance, but the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) had even greater percentage losses.

Index

Daily Percentage Change (Decline)

Daily Point Change

Dow

(2.79%)

(876)

S&P 500

(3.88%)

(151)

Nasdaq

(4.68%)

(531)

Data source: Yahoo! Finance.

With Monday's declines, the Nasdaq fell to 33% below its record high from November, while the S&P 500 closed down 22% from its best levels. Yet the Dow's 17% loss remained slightly less extreme than the other two benchmarks, keeping it out of what's officially considered bear market territory. Below, we'll look at a few of the reasons the Dow has been a relative outperformer.

1. The Dow's exposure to energy

One key to the Dow's performance in 2022 has been Chevron (NYSE: CVX). The oil major has soared 43% so far this year, making it by far the Dow's biggest winner.

What might be surprising to investors is that Chevron alone gives the Dow a fair amount of energy exposure comparably. At 3.7% based on Chevron's closing price on Friday, it's not a huge portion of the average. But it's far greater than the 0.75% weighting of energy stocks in the Nasdaq. And while it is somewhat less than the S&P, Chevron has been a better performer than some of its peers among S&P 500 energy stocks.

2. A solid helping of defensive stocks

The Dow also has a greater proportion of defensive value-based stocks than the S&P 500 and Nasdaq. Drugmaker Merck (NYSE: MRK) is still up double-digit percentages on the year. Insurance giant The Travelers Companies (NYSE: TRV) is also higher, as the industry has largely been able to avoid catastrophic events so far and stands to benefit from higher bond yields. Coca-Cola (NYSE: KO) isn't a high-growth company, but it has reliable cash flow and consistent dividends. Those traits are appealing to investors right now.

Even some modest losers are contributing to relative performance. UnitedHealth Group (NYSE: UNH), for instance, can count on sustained demand for its health insurance and healthcare services businesses, and that has helped limit its losses in 2022.

Meanwhile, you won't find a huge number of high-growth darlings in the Dow. A few stocks arguably got ahead of themselves and have seen substantial moves lower to give back some of their gains from recent years. For the most part, though, losses among individual Dow components have been fairly measured, with about half of the average avoiding declines of more than 10%.

3. Smart cyclical plays

And some other stocks in the Dow have performed well because they've been able to benefit from where the current business cycle stands. Caterpillar (NYSE: CAT) has seen rising demand for heavy equipment as high commodity prices make it more beneficial to work to produce natural resources. Chemical company Dow (NYSE: DOW) similarly has opportunities to serve those benefiting from prices of key goods.

All in all, it's hard to treat a 17% drop in the Dow Jones Industrial Average as a big win for investors. But when you compare it to the much more substantial losses you're seeing in other key market indexes -- let alone some individual stocks in those markets -- it makes you appreciate the blue chip quality of the Dow and its components.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Should you invest $1,000 in Arena Reit right now?

Before you buy Arena Reit shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Arena Reit wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Dan Caplinger has positions in UnitedHealth Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended UnitedHealth Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Happy family watching Netflix together.
International Stock News

Netflix stock gained 21.4% last month. Here's how.

Is Netflix on track for a long blockbuster run? Check out what's fuelling investor excitement about the media-streaming veteran right…

Read more »

An elderly man finds out he's made a mistake.
International Stock News

Warren Buffett's career in review: His worst investment decisions

Despite the wins, Buffett has also made plenty of errors in his long career.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
International Stock News

Warren Buffett's career in review: His best investment decisions

Buffett's best buys are simply astonishing.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Meta Platforms is ramping up data center and AI investments. Is the growth stock a buy now?

Let's take a look.

Read more »

A head shot of legendary investor Warren Buffett speaking into a microphone at an event.
International Stock News

Berkshire Hathaway stock plunges after Warren Buffett steps down. Is this a golden opportunity to buy?

Investors might be wondering whether they should be buying or selling Berkshire Hathaway stock now.

Read more »

Man with virtual white circles on his eye and AI written on top, symbolising artificial intelligence.
International Stock News

Where Will Alphabet Be in 5 Years?

Today, the lowest-valued stock in the "Magnificent Seven" is Alphabet, and it's not close.

Read more »

Silhouette of CEO standing in conference room looking out at cityscape.
International Stock News

Who is Warren Buffett's successor Greg Abel?

Buffett's successor has been in training for years.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
International Stock News

Do Google's antitrust woes make Alphabet stock a buy, sell, or hold?

In the past year, Google lost two major antitrust cases aimed at the heart of its business.

Read more »