The real stock index to watch

Although it gets little attention, the key index to watch if you really want to know what’s happening in the U.S. stock markets is the Wilshire 5000. That’s because it represents the total U.S. market – small, mid, and large-cap stocks. By contrast, the Dow and the S&P 500 only reflect what’s happening to the share prices of major corporations while Nasdaq has become the proxy for the high-tech sector.

The Wilshire told us that, when all was said and done, the broad U.S. markets barely budged during the week of July 22, when the Dow and Nasdaq were rocking and rolling. That may be difficult to believe, given the screaming newspaper headlines we read as the markets plunged and then soared, but that’s how it all came out in the end.

To July 26, the Wilshire was down 24.4% for 2002. That’s bad, but nowhere near as bad as the Nasdaq performance (-35.3%) and actually a bit better than the dive of the S&P 500 (-25.7%). Only the Dow was stronger among the major indexes.

So if you really want to get a sense of what is happening in the broad U.S. markets, the Wilshire 5000 is the index to watch.

Adapted from an article that originally apared in the Internet Wealth Builder, a weekly e-mail investment newsletter that features some of Canada’s leading stock market experts.