No, Stocks Are Not Flat for the Year

If you’re just getting back from summer vacation and catching up on your markets news, you might have seen a few references to the Dow Jones Industrial Average’s bad day on July 31. The stock gauge fell 317 points, “wiping out the year’s gains.”

That’s true, but it’s also pretty much irrelevant. Of all the widely cited equity benchmarks, the Dow Jones might be the flimsiest, and it is certainly a poor proxy for the state of the broader economy. The Dow’s flaws are well known: It tracks just 30 companies, and it does so based on price, resulting in a lot of kooky additions and subtractions and exclusions for reasons other than the components’ actual value as financial bellwethers. As of Aug. 18, the Dow is up 1.5 percent for the year. The other stock indices tell a different story: The Standard & Poor’s 500 is up 6.7 percent; the Nasdaq Composite is up 7.8 percent; and the Russell 3000 is up 6.1 percent. Glance at those numbers, and you draw much rosier conclusions about the health of corporate America.