The Dow Trailed the S&P 500 in 2020. It Was the Blue Chips’ Worst Relative Performance Since 1998.

A Boeing 737 MAX airplane.

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The world’s most famous stock index had a disappointing 2020.

The Dow Jones Industrial Average generated a 9.7% total return including dividends, trailing the 18.4% return for the S&P 500 index and far behind the Nasdaq Composite’s 45% advance. The Dow finished 2020 at 30,606 while the S&P 500 ended at 3,756.

It was the worst showing of the Dow Industrials relative to the S&P 500 since 1998, when the S&P 500 returned 28.6%, 10 percentage points ahead of the Dow.

The Dow was hurt by a 34% drop in Boeing (ticker: BA) to $214, which cut more than 700 points from the index. Boeing began 2020 as one of the highest priced Dow stocks and thus had an outsize influence on the index, which uses an old-fashioned price weighting. Also depressing the Dow were declines in Chevron (CVX), IBM (IBM), JPMorgan Chase (JPM), and Merck (MRK).

The share prices of the 30 Dow components are added up and then multiplied by about 6.6 to arrive at the index’s value.

Apple (AAPL) was the biggest winner in the Dow, gaining 81%, while Boeing was the worst performer.

The S&P 500 has been led by its five giant tech components: Apple, Microsoft (MSFT), (AMZN), Alphabet (GOOGL), and Facebook (FB). Only two of them—Apple and Microsoft—are in the Dow. The high share prices of Amazon and Alphabet make it hard to add them to the Dow because either would overwhelm the other components. Facebook is a candidate with a share price of $273.

While the tech sector shined in 2020, gaining over 40%, the Dow’s six tech components were mixed with Intel, IBM and Cisco Systems (CSCO) in the red. Microsoft gained 41%. The newest tech member of the Dow, (CRM), is down nearly 20% since it was added at the end of August. It replaced former Dow leader Exxon Mobil (XOM).

Barron’sargued in August that Facebook would have been a better addition to the index because Facebook is better known than Salesforce and is far more profitable.

In the other two shifts then, Amgen (AMGN) replaced Pfizer (PFE) in the Dow and Honeywell International (HON) took the place of Raytheon Technologies (RTX).

The Dow also trailed the S&P 500 in 2019, returning 25.3% to the S&P’s 31.5%. Over the past 10 years, the S&P is ahead with a 13.9% annualized return, versus 13% for the Dow. But the Dow leads the S&P 500 over the last 20 years, 7.3% to 6.5% in annualized returns.

This shows that the Dow remains relevant over the long term despite its old-fashioned price weighting and the lack of some of the most dynamic and successful tech companies.

The index, however, needs to do better to catch up to the S&P 500. That could happen if value-oriented stocks shine 2021 since they are well represented in the Dow.

Write to Andrew Bary at