Dow Rises, Nasdaq Falls: Why You Can't Generalize US Stocks This Weekend

Even if you hear that US stocks have fallen, it does not necessarily mean that the investment trusts you hold will fall in the same way. In the US market on Friday, November 13, the Dow Jones Industrial Average rose slightly, while the Nasdaq Composite Index fell. What you should look at on Sunday morning is not the simple question of whether ‘US stocks as a whole are up or down,’ but rather the difference in what kind of stocks are heavily weighted in each index.

What happened in the US market on Friday

The closing prices on November 13 were 52,347.55 for the Dow Jones Industrial Average, up 0.10% from the previous day; 7,561.67 for the S&P 500, down 0.40%; and 25,136.27 for the Nasdaq Composite, down 0.91%. These are the final values for the US market on Friday, and it does not mean that there was any new stock market trading on Sunday.

The fact that the indices moved in opposite directions on the same day is the key information here. On Friday, the decline in semiconductor-related stocks was notable; according to reports, AMD fell about 8.8%, Broadcom about 4.8%, and Nvidia about 2%. However, one cannot pin the reason for individual price movements on a single factor. Reports cite multiple elements, such as concerns over tech stocks and interest rate outlooks.

Why did the Dow rise while the Nasdaq fell?

The Dow Jones Industrial Average is a price-weighted index calculated based on the stock prices of 30 companies. On the other hand, the Nasdaq Composite is a market-capitalization-weighted index that includes a wide range of stocks listed on the Nasdaq market. The S&P 500 is also a large-cap index based on market capitalization. It is not just the number of stocks that differs, but also what is valued more heavily.

For example, the Dow, where the movements of high-priced stocks have a relatively greater impact, and an index where the movements of companies with large market capitalizations have a greater impact, will not be affected in the same way by a decline in semiconductor stocks. Even if a stock with a large weight in one index drops sharply, the rise of other components in a different index may offset that impact.

For this reason, you cannot say that ‘because the Dow rose, US stock investment trusts will rise’ or ‘because the Nasdaq fell, global equity funds will fall by the same percentage.’ This is because the companies, weights, and target markets that make up the indices are different.

What does this mean for Japanese installment investors?

If you hold an investment trust linked to the S&P 500, the starting point is to look at the changes in the S&P 500 itself. If it is linked to the Nasdaq, check the bias toward high-tech stocks. If it is a global equity fund, the inclusion of not only the US but also Japan, Europe, and emerging countries, as well as their ratios, is also relevant.

Furthermore, for yen-denominated investment trusts, exchange rates are also a factor. Even if US stocks fall in dollar terms, if the yen weakens during the same evaluation period, the decline in yen terms may be smaller. Conversely, if the yen strengthens, the decline may be larger. However, because the timing of the reflection of exchange rates and the net asset value differs, you cannot fully calculate the Sunday morning net asset value of an investment trust just by looking at the US Friday closing prices.

The same applies to Japanese stocks. While exchange rates are important for export companies, performance, demand, raw material costs, interest rates, and company-specific factors are also involved. It is premature to directly link the decline in US tech stocks to a decline in the entire Japanese market on the next business day.

Was Friday’s decline a decline for the whole week?

Here, too, the impression changes if you change the period. According to the Associated Press, while the S&P 500 fell on Friday, it rose 2.5% for the week. The Dow and Nasdaq were also positive for the week. A one-day decline and a one-week rise are not contradictory. This is because the gains made during the week exceeded the decline on Friday.

If you change your long-term accumulation strategy based solely on the information that “it went down yesterday,” your investment horizon and objectives may not align. Grasping short-term price movements and changing long-term asset allocation are two different decisions.

Three things to check before the next trading day

First, the underlying assets of the products you hold. The Dow, S&P 500, Nasdaq, and global stocks are not the same. Check not only the product name but also the target index and inclusion ratio in the investment company’s prospectus.

Second, separate Friday’s closing price from the next business day’s trading. As of Sunday, there is no new regular trading closing price for the US stock market. Do not preemptively treat the next US trading day’s movements as Friday’s results.

Third, align the observation times for the yen-denominated net asset value and the dollar-denominated index. Yen conversions and investment trust valuations differ depending on exchange rates, business days, and calculation times. You will be misled if you line them up as if they were the same numbers for the same day.

Conclusion: You cannot make decisions based on a single “US stock” category

The Friday market saw a slight rise in the Dow alongside a decline in the Nasdaq. When you consider that major indices rose for the week as a whole, it becomes clear that short headlines can lead to a misunderstanding of the market’s state. Compare your holdings only after aligning the target index, time period, and currency of the products you own. This is the decision-making criterion derived from these numbers that you can use over the weekend.

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