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Bumping the Benchmark

The chasm between the Nasdaq Composite and its rival benchmarks in the first half of 2020 has been much like that between Olympic sprinter Usain Bolt and everyone else in the world. The technology-laden index has enjoyed an ever-widening lead between itself and the Dow Jones Industrial Average and the S&P 500 index so far this year due to its perceived resilience against the COVID-19 pandemic that wreaked havoc on financial markets and the economy starting in March.

The Nasdaq is up 10% year to date, while the Dow is down 10.8% so far, the S&P 500 is down around 6% and the small-capitalization Russell 2000 index is off more than 15% in the first six months of a dramatic year of events headlined by the viral outbreak.

The main benchmarks have actually staged a powerful resurgence from a rout induced by worries about the economic damage from closures and social-distancing measures implemented to curtail the spread of the deadly contagion that has recently gathered more momentum in a number of states. Since a low hit on March 23, the Dow has gained about 37%, the S&P 500 has gained 36% and the Russell 2000 index has climbed 41%, while the Nasdaq has surged by more than 43% since that nadir, and it is that outperformance that has the Nasdaq up for the year to date.

Indeed, the last time the Nasdaq has been higher in the middle of the year while the Dow and S&P 500 were down was 1977, according to Dow Jones Market Data, and that this is only the second such occurrence in the existence of the Nasdaq, which was first established in 1971.

The Nasdaq is enjoying the best outperformance against the economically sensitive Dow since 1983, when it had a 20.3-percentage-point lead over the blue-chip index. It’s also the widest half-year divergence between the Dow and the S&P 500 since 1983, when it held a 17.6-percentage-point lead.

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