The S&P 500 has been the U.S. stock market’s benchmark index for nearly 70 years. Founded in 1957 by Standard & Poor’s, the index tracks the performance of the 500 largest stocks by market cap that are listed on U.S. exchanges. Tracking roughly 80% of the total market cap of U.S. public companies, it makes sense that the S&P is our standard barometer for how the stock market is faring.
But in recent years, it’s been a bit more deceiving. The S&P was up more than 20% in 2023 and 2023 and has advanced more than 12% so far this year. And yet, those advances – particularly the ones in 2023 and for much of 2024 – were quite top-heavy, with the so-called Magnificent Seven stocks (Amazon (AMZN), Apple (AAPL), Google (GOOG), Meta (META), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA)) doing most of the heavy lifting.
Those seven mega-cap tech stocks account for about 35% of the S&P 500’s total market cap. And they’ve been crushing it these last few years, with an average gain of 161% since the Roundhill Magnificent 7 ETF (MAGS) was created in April 2023. During that same span, the S&P 500 as a whole is up 61% – 100 percentage points lower. Thus, the Not-So-Magnificent 493 – i.e., the 493 non-Mag. 7 stocks that account for the remaining 65% of the index – haven’t been pulling their weight.
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A non-weighted performance among S&P 500 stocks can be found in the Equal Weight S&P index (RSP), which has risen roughly half as much as the benchmark index, up 30% since April 2023. The closest big-index parallel to the performance of the Equal Weight index these last few years? That would be the Dow Jones Industrial Average, which has advanced 36% from our April 2023 measuring point.
Why the Dow Is a More Accurate Market Gauge in 2025
The Dow, of course, is the oldest and grayest U.S. stock market index, dating all the way back to the 19th century, when it was founded by Charles H. Dow and Edward Jones in 1896. For its first 60-plus years, the Dow was the measuring stick for how U.S. stocks were performing. Perhaps it should be again.
I say that with tongue only lightly placed in cheek. For several years now, especially in this post-Covid era where Big Tech just keeps growing more outsized, the Dow has been the more accurate proxy for what it feels like to be a U.S. investor.
That’s because it’s not as heavily weighted to the Mag 7 as the S&P. Sure, it has a few of them – AMZN, AAPL, MSFT and recent addition NVDA are all in there. But so are big retailers like Walmart (WMT) and Home Depot (HD), financials like Goldman Sachs (GS) and JPMorgan (JPM), mega-brands (Nike (NKE), Disney (DIS), McDonald’s (MCD), Coca-Cola (KO)), credit card behemoths (American Express (AXP), Visa (V)), healthcare (UnitedHealth (UNH)), construction (Caterpillar (CAT)), etc.
Granted, those are all in the S&P 500 too, but in a 30-stock index like the Dow, they carry more weight and are all fairly accurate stand-ins for their sectors. Goldman Sachs, at 10.6%, is the most heavily weighted stock in the Dow. No other stock tops 7%, with MSFT, CAT and HD the only other three that are north of 5%.
This more egalitarian distribution makes the Dow similar to the Equal Weight index. And in a market in which only four of the 11 S&P sectors are cheaper on a forward price-to-earnings basis than the index itself (forward P/E of 23.4) despite that index being at record highs, that tells you how deceiving the S&P’s performance has been during this nearly three-year bull market.
You can see for yourself in the following two charts, which show the relative performance of the Dow (first chart) and the S&P 500 (second chart) to the Equal Weight index.
In fairness, the rally in U.S. stocks has been more widespread of late than it was in 2023 and much of 2024, as the Equal Weight index’s 8.4% return this year isn’t too far off the 12.8% return in the S&P. But again, the Equal Weight index’s 2025 return is almost identical to the Dow’s 8.5% YTD return.
Look, it’s unlikely the Dow will ever be restored as the benchmark for U.S. stock performance nearly seven decades after it was supplanted by the S&P 500. That would be akin to taking Coke and Sprite off the shelves and replacing them with Tab and Tang. But unless your portfolio is comprised solely of Mag. 7 stocks (which, if it is – well played!), the Dow is a more precise gauge of how the overall market is behaving these days.
It may never be the benchmark U.S. stock market index again. But it could be yours.
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