Dow & Nasdaq: A Spot of Bother for Tech Investors

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A rather perplexed investor, what ho!

The January Barometer, you see, is a bit of a talking point amongst those who peer into the murky crystal ball of the stock market. The notion being, rather simply, that how January performs gives one a jolly good indication of how the rest of the year will unfold. The S&P 500, bless its heart, did put on a bit of a show in January – a modest 1.37% rise, nothing to write home about, but perfectly respectable. However, a certain disquiet is brewing for those whose portfolios lean heavily towards the technological, and it’s a tale that deserves a bit of unpacking, don’t you think?

Dow vs. Nasdaq: A Most Peculiar Contest

One finds, when observing the financial markets, that rules are often more suggestions than ironclad decrees. The January Barometer, for instance, has proven accurate roughly 80% of the time in recent years, while the “Santa Claus Rally” – a festive little surge, that – manages a mere 27%. Exceptions, you see, are frightfully common. However, there’s one little quirk that’s been remarkably consistent.

Whenever the Dow Jones Industrial Average has lagged behind the Nasdaq Composite Index by more than a quarter of a percentage point in January, the Dow has gone on to underperform the tech-heavy Nasdaq for the remainder of the year.

It’s happened nine times out of the last fifteen, a most impressive record! One would have to rummage back to January 2007 – a time when the housing market was inflating like a particularly ambitious balloon – to find a deviation from this pattern. It stands to reason, of course, that tech stocks, being the energetic chaps they are, tend to grow at a more spirited pace than the more established, somewhat portly corporations that make up the Dow. But what of those years when the Dow actually outran the Nasdaq in January, as it did this year? That, my dear reader, is where things get a touch interesting.

A graph, looking rather important

The January Omen: A Spot of Worry?

The Dow has bested the Nasdaq by more than 0.25% in January on five occasions in the last fifteen years – 2011, 2013, 2016, 2022, and 2025. In three of those years (2011, 2016, and 2022), the Dow went on to outperform the Nasdaq – by 6.7, 7.3, and a rather substantial 19.8 percentage points, respectively. However, in the other two (2013 and 2025), the Nasdaq rallied and overtook the Dow – by 6.6 and 11.8 percentage points, respectively. So, while the Dow beating the Nasdaq in January has “only” predicted Nasdaq underperformance 60% of the time, it’s still a considerably better record than the 0% it manages when the Nasdaq leads the charge in January. A rather telling statistic, wouldn’t you agree? How much should tech investors fret, I wonder?

Mixed Signals: A Dash of Uncertainty

There are already whispers, you see, that tech stocks may not be quite the roaring success they’ve been in recent years. The tech sector has enjoyed a positively dazzling run, with the Nasdaq rising a remarkable 122.1% between 2023 and 2025, while the Dow ambled along with a mere 45% gain. Valuations for some of the biggest tech companies have become, shall we say, a trifle exuberant, and a bit of a correction may be on the cards.

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And, indeed, a bit of a wobble appears to be underway. So far in February, the Nasdaq has dipped 4.1% while the Dow has merely slipped 0.8%. Big tech names like Nvidia and Oracle have lost more than 9% since the start of the month. This could simply be a “Banana Peel February” – stocks have a habit of stumbling in February, you see – or it could be a more serious indication of things to come. Long-term tech investors shouldn’t panic, of course, but a touch of diversification might be a jolly good idea, just to be on the safe side.

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2026-02-10 15:12