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Market Statistics

Broader Market is Irrelevant

Broader market performance could be irrelevant for passive investment purposes or even strategic allocations. Since 1992, Dow Jones Industrials Average total return has outperformed the broader market by a wide margin and the same holds since 2010 for S&P 500 total return.

The relative performance chart below shows Dow Jones Industrial Average total return has outperformed Wilshire 5000 (total return) by a wide margin from 01/02/1992 to 04/09/2021.


Specifically, total return for Dow Jones Industrials Average is 2,023% versus only 972% for Wilshire 5000 (total return.) S&P 500 and Russell 2000 total return figures are close, 1,685% and 1,664%, respectively.

Dow Industrial Average total return performance has decreased relative to large and small caps in recent years mainly due to growth in technology sector. The relative performance chart below shows S&P 500 total return has outperformed Wilshire 5000 (total return) index by a wide margin from 01/02/2010 to 04/09/2021.


Russell 2000 total return performance is 308% and for S&P 500 it is 358%, as compared to 322% for Dow Jones Industrial Average total return and 268% for Wilshire 5000 (total return.)

Since January 2010, S&P 5000 and DJIA total return performance results were close until the top of February 2020 while Russell 2000 total return and Wilshire 5000 (total return) underperformed. In other words, the broader market was irrelevant and S&P 500 was the best choice for index tracking purposes.

There is possibility of a divergence between small and large caps widening in the future and the latter underperforming. There is also a possibility the recent small caps outperformance is an aberration. Despite that, the conclusion is that the broader market is irrelevant for passive investing purposes or even in the case of strategic allocations. There seem to be many negative outliers in the broader market and their effect on total return performance is significant. This may not change in the near future or even in the next 10 years.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.


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