Dow Industrials Paying Price for Leaving Out Amazon and Alphabet

For a lesson in the pitfalls of market timing, consider the Dow Jones Industrial Average, whose refusal of admission to Alphabet Inc. and Inc. has gone from a blessing to a curse in the space of a year.

All but barred for inclusion until splitting their stocks in 2022, the trillion-dollar behemoths have become the benchmark’s most eligible absentees, with their influence felt over vast swaths of American commerce. Keeping them out was a boon for passive owners of the Dow in last year’s tech wipeout, walling them off from the trouncing suffered by the S&P 500 and Nasdaq 100.

Yet in this year’s artificial-intelligence-driven surge, their absence is conspicuous. The 30-stock gauge has climbed 5.3% in 2023, trailing the others by double-digit percentages.

Now, with three years passed since the last Dow reconfiguration, speculation that the duo’s day has come is being heard again. To some, including Richard Moroney, chief investment officer at Horizon Investment Services, the time may be ripe for a culling with potential stragglers including Walgreens Boots Alliance Inc., Verizon Communications Inc. and Intel Corp.

“At current prices, these stocks have very low weightings in the price-weighted Dow,” said Moroney, who is also the editor at Dow Theory Forecasts, an independent investment adviser. “WBA and VZ operate in industries that no longer seem so central to the US economy.”

A representative for S&P Dow Jones Indices declined to comment.

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