While investors seek shelter in more defensively oriented equity names, one market technician sees the Dow’s growing margin of outperformance over the S&P 500 and Nasdaq as a sign that the latest rebound in stocks might fade away quickly like the last one did.
In a Monday note to clients, Jonathan Krinsky, chief market technician at BTIG, said the Dow Jones Industrial Average DJIA almost never outperforms during the early stages of an enduring equity rally — and when it does, these rallies typically fizzle. He pointed to 2002 as a particularly notable example. Like then, U.S. stocks have been caught up in a cycle where the Dow’s margin of outperformance has continued to widen.
Just the other day, UBS Group Chief Investment Officer Mark Hafaele reiterated that he has advised clients to favor defensive sectors like health-care stocks and consumer staples, while avoiding growth stocks like tech.This year, the trend of Dow outperformance started during the first-quarter, when weak big-tech earnings sent shares of Netflix Inc. NFLX , Meta Platforms Inc. META and their peers reeling.
By the time October’s stellar run for stocks was over, the Dow had risen just shy of 14%, logging its strongest October performance on record. What’s more, it beat the Nasdaq Composite by 3.7 percentage points, the widest margin since 2002, and the S&P 500 by nearly six percentage points, the widest margin since April 1999, according to DJMD.