NEW YORK -- The Dow Jones industrial average has been the star of the stock market firmament in 1992. And that in itself might be a bad sign.
Only twice in the last decade has the Dow's performance, been so much better than the broadly based Standard & Poor's 500. And those times, said Byron R. Wien, the chief U.S. equity strategist for Morgan Stanley, were not great times to buy stocks.
The first time was in the early fall of 1987, shortly before the 1987 stock market crash, which drove the entire market down sharply.
The Dow did not again grow as strong relative to the S&P until July 1990. That peak came just before a sustained decline brought on by the Iraqi invasion of Kuwait and the onset of the recession in the United States.
Is that any more than a coincidence? Mr. Wien argues that it may be. The recent Dow strength has reflected the fact that the Dow has a larger representation of cyclical stocks, which have been the strongest this year as investors have bet on recovery.
Mr. Wien sees that as a long-term change in the stocks that lead the Dow, and he points out that such changes rarely come without some market turmoil. He thinks a decline that might drive the market down 10 percent or more could be under way.
A look at the last two times the Dow so far outshone the S&P 500 does not provide exact parallels to the current situation. In the market's rise of 1986-87, cyclical stocks were also the leaders within the Dow, with Goodyear and Bethlehem Steel the best performers.
But Procter & Gamble, a steady growth stock, was a leader coming into the 1990 decline, along with the more cyclical Chevron and Boeing. This year, the best Dow stocks have been General Motors and Union Carbide.
The basic composition of the two indexes might help explain the movements.
The Dow, with only 30 stocks, is computed on a price-weighted basis. That is, the higher the price of a given stock, the higher its weight in the index. That can mean that the hottest stocks, as they rise in price, take on an added weight in the Dow and help push it up even more. By contrast, the S&P 500 includes 500 stocks and is weighted by market capitalization.
Should investors take such indexes seriously? Mr. Wien quotes Sam Steadman, a market guru at Loeb Rhodes more than a generation ago: "These things are to raise questions. When you go hunting, you take your dog along, but you don't give him the gun."