As the other major U.S. stock-market averages have reached new all-time highs, the Dow Jones Transportation Average (DJT) has faced challenges.

Lagging Performance

The index, as of March 4, was more than 6% below the peak it achieved in November 2021 — almost two years prior. Over the past year, the Dow Transports have fallen behind the broader Dow Jones Industrial Average (DJIA) by over 12 percentage points. Investors are concerned because the transportation sector is often seen as an indicator of U.S. economic activity.

Contrary Evidence

Surprisingly, there is a lack of data to support this idea. In fact, there is some evidence indicating that the overall market performs better following weakness in the Dow Transports.

Market Analysis

An analysis of the U.S. stock market's performance since 1928 revealed interesting insights. By comparing the trailing 12-month returns of the Dow Industrials and the Dow Transports, it was found that the S&P 500 and its predecessor index tended to fare better after periods where the Dow Transports significantly lagged behind — mirroring the current situation in the market.

Chart Representation

The chart below illustrates these differences over time, shedding light on the relationship between the Dow Transports and the broader U.S. stock market:

Reassessing Concerns About Dow Transports Weakness

The recent performance of the Dow Transports has sparked some concerns among investors, but is it really as alarming as it seems? What happens when the Dow Transports lose ground in absolute terms, rather than just relative to the DJIA? And how does this impact their role as a leading economic indicator?

Finding Reassurance in Historical Data

Upon closer examination, the data reveals that there may be no need for alarm. In fact, historical analysis shows that the S&P 500 tends to show better performance following periods where the Dow Transports have fallen compared to when they have gained. The difference in 12-month gains is particularly notable, with a 9.0% increase after declines in the Dow Transports versus a 6.6% increase after gains.

Focusing on Legitimate Concerns

In a market environment filled with various sources of worry such as overvaluation and excessive market optimism, it's important to prioritize concerns that truly matter. The weakness in the Dow Transports may not be one of those pressing issues that should add to investors' anxieties.


While concerns about the Dow Transports' performance may have caught the attention of investors, historical data suggests that there may be no immediate cause for worry. By focusing on legitimate concerns and avoiding unnecessary alarm, investors can navigate the market with confidence and clarity.

The Key Takeaway

U.S. stock investors may be chasing the wrong target

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