In a recent article, Bloomberg BusinessWeek referred to their “The Death of Equities” article that was published on August 13, 1979.
Bloomberg owned up to an article that they didn’t have much to do with and used it as a point of reference for the market’s change since 1979. It seems that very often, bad calls are buried when they can be used as lessons. Good job Bloomberg BusinessWeek.
What stood out to us about the article is the reference to the performance of the Dow Jones Industrial Average at +9,000% compared to the S&P 500 Index at +7,000%. Many contend that the Dow Jones Industrial Average is an outdated index and that the S&P 500 is “better” because of the broader diversification being representative of the U.S. economy.
Our view has always been, go with the index that has the longest history of data. In this case, the Dow Jones Industrial Average has published record of data going back to 1896 while the S&P 500 goes back to 1957. Also, greater concentration does better than broad diversification when selecting within the “blue chip” category of stocks.
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