There is a constant conversation among market participants about which indexes are the better representation of the stock market, particularly in the United States.
While the media often quotes the Dow Jones Industrial Average daily changes, professionals tend to steer towards the S&P500.
The argument normally revolves around the price-weighted nature of the Dow Jones Industrial Average vs the market-cap driven S&P500.
The diversity of 500 stocks in the S&P is also a key point when compared to just 30 stocks for the Dow.
Today, I just wanted to remind everyone why I think the Dow Jones Industrial Average is underrated and why I think it is still one of the most useful indexes for any stock market participant.
High Positive Correlation With The S&P500
First of all, the Dow Jones Industrial Average and the S&P500 have a very high positive correlation to one another. [Read more…]