The Meaning of Dow 50,000

ON February 6, the Dow Jones industrial average breached 50,000 before falling back as geopolitical uncertainty took its toll.

- STREET SMART BY JAMES K. GLASSMAN

The market doesn’t give a hoot about round numbers, and I say that as someone who coauthored a book called Dow 36,000 (which the Dow reached in November 2021). The numbers that really count for the Dow are the ones that tell you how it has done over the scope of history—and it has done extremely well. And while no one can predict the future, a reasonable reliance on the past tells us the Dow will keep doing extremely well.

The benchmark is a remarkably accurate representative of the market as a whole. The Dow is composed of just 30 stocks, and they are, weirdly, weighted by their price—which is largely arbitrary—rather than their market capitalization, or shares outstanding times price, which is the typical way of fashioning an index. As a result, Goldman Sachs, with a market cap of $260 billion, accounts for 11% of the movement of the Dow while Nvidia, with a market cap of $4.3 trillion, accounts for just 2%.

Still, the Dow has returned almost precisely the same as the S&P 500 index, consisting of roughly the largest 500 U.S. stocks by market cap. Between January 1990 and December 2025, the Dow returned an annual average of 10.85%; the S&P, 10.89%.

Readers of this column may remember that I am not fond of recent decisions by the experts who currently determine the composition of the Dow. Their mistakes are manifest in recent performance: The S&P 500 has beaten the Dow in six of the past seven years. That’s why in 2023 I assembled my own version of the Dow, which I call Top 30 and will review in the July issue.