Why Isn't Nasdaq 5500 As Big A Story As Dow 20K?

The Dow Jones Industrial Average continues to flirt with that psychological 20,000 milestone. Though it is only a number, there is a lot of media hype over the potential achievement of this milestone, especially amid the ongoing election-induced rally.

While investors are eagerly waiting to see the Dow touch the 20,000 mark, they seemed to have ignored the NASDAQ Composite index, which recently touched 5,500 mark and has continued to stay in that zone.

Why The Dow?

The reason is pretty simple. Dow is one of the oldest exchanges and is synonymous with market movement. Since its creation in 1896, the Dow is the most widely followed index by investors, as well as the general public, to gauge the U.S. stock market.

Though the Dow tracks only 30 large American corporations, these companies are inclusive of all industries except utilities and transportation, creating a broad overview of the economy.

Furthermore, the companies constituting the index are economic bellwethers whose financial performance is a reflection of the current economic scenario. In other words, investors get a feel of where the economy is headed by following these 30 large companies.

As a result, the Dow attracts huge media attention, and tracking the movement of Dow is almost unavoidable for any financial outlet, since it is used as a proxy for the state of the economy.

What About The Nasdaq?

On the other hand, the Nasdaq predominantly consists of technology stocks and growth stocks. This index also includes some companies that are not based in the United States.

Another factor that acts against Nasdaq is it includes many speculative companies with small market capitalization. As such, its movement also indicates performance of speculative stocks.

Though critics call the undue importance given the Dow "outdated" in today’s technology-driven market, its connection with the U.S. economy is profound and cannot be ignored.

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