After Underperforming the Nasdaq for 8 of the Final 10 Years, the Dow Will Beat the Nasdaq and S&P 500 in 2026

• The Dow’s price-weighted construction is a basic distinction that closely impacts its efficiency.

• The Dow has much more publicity to monetary shares than the market-cap weighted Nasdaq and S&P 500.

• Balancing a growth-heavy portfolio with dividend-paying Dow shares is a good way to spice up diversification.

• 10 shares we like higher than Dow Jones Industrial Common ›

The Dow Jones Industrial Common (DJINDICES: ^DJI) had an excellent yr in 2025, with a whole return of 14.9%. However it nonetheless fell in need of the Nasdaq Composite‘s (NASDAQINDEX: ^IXIC) 21.1% whole return, marking the eighth yr out of the final 10 that the Dow has underperformed the Nasdaq.

Here is why the Dow may go towards the chances and outperform the Nasdaq and the S&P 500 (SNPINDEX: ^GSPC) in 2026, what it may imply to your monetary portfolio, and 5 Dow dividend shares to purchase now.

The Nasdaq Composite accommodates hundreds of shares listed on the Nasdaq trade, whereas the S&P 500 is comprised of round 500 main large-cap corporations. The Dow is much more selective, with simply 30 holdings.

An enormous distinction between the Dow and different indexes is that it is price-weighted moderately than market-cap weighted, that means probably the most useful corporations do not carry probably the most weight. The 5 largest holdings in each the Nasdaq and the S&P 500 are Nvidia, Alphabet, Apple, Microsoft, and Amazon. The 5 largest Dow holdings by weighting are Goldman Sachs, Caterpillar, Microsoft, American Categorical, and House Depot (NYSE: HD).

Large outperformances by monetary shares with excessive nominal inventory costs, akin to Goldman Sachs, American Categorical, Visa, and JPMorgan Chase, have pushed financials to change into the most important sector within the Dow. They make up 28.3% of the index, adopted by 20.2% for tech and 14.7% for industrials. The Nasdaq is dominated by tech-focused corporations, whereas 34.4% of the S&P 500 is in tech.

The addition of Nvidia and Amazon (in 2024) and Salesforce (in 2020) has made the Dow extra growth-stock-focused. However it’s value noting that Amazon and Salesforce each closely underperformed the S&P 500 in 2025. So did Dow elements Apple and Microsoft. Though Nvidia crushed the S&P 500 once more in 2025, it solely makes up 2.3% of the Dow in comparison with 7.2% of the S&P 500 and 13.4% of the Nasdaq-100, which is the 100 largest non-financial corporations by market cap listed on the Nasdaq inventory trade.

During the last decade, the largest yr of outperformance for the Dow relative to the Nasdaq and S&P 500 was 2022, when the Dow misplaced worth, however did not fall as a lot because the S&P 500 or Nasdaq. 2016 is the one different yr the Dow beat the Nasdaq, though it was shut in 2017, 2018, and 2021.

Knowledge supply: YCharts.

All informed, the Nasdaq produced a complete return of 408.3% during the last decade, in comparison with 298.3% for the S&P 500 and 242.6% for the Dow.

Given its focus in industry-leading worth shares, the Dow ought to maintain up higher throughout a inventory market sell-off than the Nasdaq or S&P 500. That is very true if the sell-off is pushed by themes that the Dow is much less uncovered to, like synthetic intelligence.

The SPDR Dow Jones Industrial Common ETF, which tracks the index, has a price-to-earnings (P/E) ratio of simply 23.9 in comparison with 29.2 for the Vanguard S&P 500 ETF and a whopping 33.5 for the Invesco QQQ Belief, which tracks the Nasdaq-100. So the Dow ought to maintain up properly if there’s a number of compression in 2026 — that means that inventory costs develop slower than earnings. The theme lately has been a number of enlargement, as a result of inventory costs have risen quicker than earnings. A number of enlargement can run wild throughout bull markets when traders are optimistic about potential progress, moderately than solely specializing in what corporations are producing at present.

Even when worth shares outperform progress shares in 2026, that does not imply it is a good suggestion to overtake your funding portfolio by promoting out of successful positions and loading up on blue chip Dow dividend shares. Relatively, a greater method is to conduct a portfolio evaluation and make the case for proudly owning shares with stretched valuations.

An awesome firm at a premium value is usually a greater long-term holding than an honest firm at an excellent value. As a result of valuations are sometimes based mostly on trailing 12-month earnings or projected earnings over the subsequent yr, an organization with a transparent runway for future progress over the subsequent three to 5 years could also be extra moderately priced than it seems at first look.

Nonetheless, traders trying to spherical out a growth-driven portfolio with worth shares can flip to main dividend-paying Dow elements like Coca-Cola, Procter & Gamble, Chevron, McDonald’s, and House Depot.

Coca-Cola and Procter & Gamble have elevated their dividends for over 60 consecutive years — making them Dividend Kings, which have a observe report of at the least 50 consecutive years of dividend progress. Each shares have pulled again these days because of a widespread sell-off within the shopper staples sector.

McDonald’s is on observe to change into a Dividend King this yr, whereas Chevron has elevated its dividend for 38 consecutive years. House Depot would not have as lengthy a streak, however it’s a nice worth for traders who consider in a housing market and shopper spending restoration.

2026 can be a prove-it yr for a lot of AI progress shares, particularly corporations which have ramped capital expenditures. Traders who’ve been shopping for these shares will need to see spending translate to earnings progress to justify excessive multiples.

Any hiccups may result in the Dow outperforming the Nasdaq and S&P 500 as a result of it has much less publicity to tech and tech-focused corporations. The Dow may additionally outperform if cyclical sectors outdoors of tech, like finance and industrials, lead the market in 2026.

Before you purchase inventory in Dow Jones Industrial Common, think about this:

The Motley Idiot Inventory Advisor analyst crew simply recognized what they consider are the 10 finest shares for traders to purchase now… and Dow Jones Industrial Common wasn’t certainly one of them. The ten shares that made the minimize may produce monster returns within the coming years.

Contemplate when Netflix made this checklist on December 17, 2004… should you invested $1,000 on the time of our advice, you’d have $482,209!* Or when Nvidia made this checklist on April 15, 2005… should you invested $1,000 on the time of our advice, you’d have $1,133,548!*

Now, it’s value noting Inventory Advisor’s whole common return is 968% — a market-crushing outperformance in comparison with 197% for the S&P 500. Do not miss the most recent high 10 checklist, obtainable with Inventory Advisor, and be a part of an investing neighborhood constructed by particular person traders for particular person traders.

See the ten shares »

*Inventory Advisor returns as of January 13, 2026.

JPMorgan Chase is an promoting associate of Motley Idiot Cash. American Categorical is an promoting associate of Motley Idiot Cash. Daniel Foelber has positions in Nvidia and Procter & Gamble and has the next choices: brief February 2026 $150 calls on Procter & Gamble. The Motley Idiot has positions in and recommends Alphabet, Amazon, Apple, Chevron, Goldman Sachs Group, House Depot, JPMorgan Chase, Microsoft, Nvidia, Salesforce, Vanguard S&P 500 ETF, and Visa. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.

Prediction: After Underperforming the Nasdaq for 8 of the Final 10 Years, the Dow Will Beat the Nasdaq and S&P 500 in 2026 was initially revealed by The Motley Idiot