Unlike the S&P 500 and the Nasdaq, the Dow weights stocks by price rather than by market capitalization derived by multiplying share prices by the number of shares outstanding. Given that it only includes 30 large capitalization U.S. companies, the Dow index arguably doesn’t reflect the U.S. economy as well as another popular index, the S&P 500, which includes 500 U.S. companies. Furthermore, since the Dow index is a price weighted index, stocks with higher stock prices have more influence on the index regardless of their market cap. Price weighted indexes are also affected by stock splits while market cap weighted indexes are not. For example, despite General Electric’s (GE -0.77%) pretty hefty market cap, its amazingly long run in the Dow came to an end in June 2018.
- On July 3, the Dow hit a new high when the Trump administration announced it would resume trade negotiations with China, averting additional tariffs (taxes on imports).
- The Dow started 2022 with a flourish, breaking closing records in the first two trading days of the year.
- Journalist Charles Dow created the index in 1896 to serve as a proxy for the overall U.S. economy.
The Dow Jones Industrial Average (the Dow) is an index of the 30 top-performing U.S. companies. The most recent all-time-high record (as of this writing) was on Jan. 4, 2022, when it closed at 36,799.65. Originally the The Dow Jones Industrial Average comprised of only 12 companies, mainly with operations in oil and gas, sugar, tobacco and railroads. Now the index includes 30 companies, with companies operating in many different sectors including technology.
As it did before, the companies listed on the Dow today are among the leaders in their core fields. Companies in the DJIA are also chosen by a committee and are balanced to try to represent the state of the overall economy. This means that certain companies may be added to or deleted from the index periodically without much in the way of being able to predict when or which stock will be changed. Despite its limitations, however, the Dow still holds a special place in American finance. Individuals can invest in the Dow, which would mean gaining exposure to all of the companies listed in it, through exchange-traded funds (ETFs), such as the SPDR Dow Jones Industrial Average ETF (DIA).
As with all stock prices, the prices of the constituent stocks and consequently the value of the index itself are affected by the performance of the respective companies as well as macroeconomic factors. Goldman Sachs strategists broke down the impact of global elections on economic growth, monetary policy, and financial markets. Salesforce has been the leader in customer relationship management (CRM) software for 10 consecutive years, and the CRM market is forecast to grow by 14% annually through 2030. Similarly, Microsoft is the leader in enterprise software-as-a-service and operates the second-largest cloud computing platform; those markets are also projected to grow by 14% annually through the end of the decade.
Analyst Opinions for Dow Jones
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2009 Recession
The value of the index can also be calculated as the sum of the stock prices of the companies included in the index, divided by a factor, which is approximately 0.152 as of November 2021
. The factor is changed whenever a constituent company undergoes a stock split so that the value of the index is unaffected by the stock split. The S&P traded at the same level Wednesday as it did in January 2022, when interest rates stood at 0% to 0.25%, 525 basis points below their current level. The rally was broad Tuesday, as the S&P 500 and the tech-heavy Nasdaq rose 1.4% to 23-month respective highs. The University of Michigan’s monthly survey of consumers, a closely tracked barometer of mood, on Friday reported that sentiment this month had risen to the highest level since 2021, up more than 21% from a year ago.Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Any historical returns, expected returns, or probability projections are https://bigbostrade.com/ hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations.
The Coca-Cola Company (NYSE:KO)
To begin with, I’m a big fan of data — and the data doesn’t lie. Even though averages are just that — averages — the Dow Jones Industrial Average has returned an impressive 9.27% on a compound annual basis over the trailing 35-year period (Sept. 24, 1984 to Sept. 23, 2019). When extrapolated outward, this works out to a doubling in value every 7.77 years. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.
The index fund bears a below-average expense ratio of 0.16%, meaning the annual fee on a $10,000 portfolio would be $16. Investors looking to capitalize on that should consider buying some of the more promising blue chip stocks in the Dow Jones. For instance, Salesforce and Microsoft have strong market positions and solid growth prospects that could unlock plenty of value for patient shareholders. Past performance is never a guarantee of future returns, but crossing the bull market threshold has historically been a good sign for stocks. Now, as inflation eases and threats of economic downturn recede, investors have piled back into stocks.
Record-low interest rates allowed firms such as Apple and IBM to borrow billions to buy back shares. These actions artificially raised their earnings per share and the prices of their remaining outstanding stocks (stocks which are still held by shareholders). That correction was more than 16% lower than its all-time high set in May of the same year, putting the index into a correction but not a bear market. Investors worried that China’s yuan devaluation and the uncertainty over the Fed’s rate increase would push the index further downward.
The index had three nine-day runs, last occurring in 1955 (when there were four nine-day stretches). The Dow continuously moved higher eight months in a row (the last occurrence of this was in 1995). Given economic cycles, Dow Jones Industrial Average has experienced bull and bear markets over the years. The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (/ˈdaʊ/), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The Dow ends a long bull market on Jan. 14, 2000, in part due to the strength of the Internet business and the subsequent bursting of the dot-com bubble. But it then falls on March 7, 2000, rebounds to 11,124.83 on April 25, and falls again to 9,973.46 by March 14, 2001, beginning the 2001 recession. It then enters a period of volatility and drops to 8,920.70 after markets open following the September 11, 2001 terrorist attacks. The recession ends in November 2002 after a period of uncertainty about war. The Dow’s activity broke new records in terms of downward movement in 2009. While it wasn’t as dramatic as the Great Depression, the drop happened much more quickly.
The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services. Investing comes with risks, that’s why the SEC and other regulators ensure all companies and investors follow financial regulations and that individuals are protected. Nearly all the Dow’s historic point gains and losses occurred in 2020 on news of stimulus packages and vaccines, but also on disappointments regarding the pandemic’s effect on the global economy.
The most recent record closing occurred on Jan. 4, when the index closed at 36,799.65, blowing past the all-time high closing of 36,585.06 it had just a day before. For Wall Street, the new S&P record definitively marks out the current period, as shares recovered 35% from the October 2022 low, as one of rising share prices known as a bull market. While the recent decade has shown strong economic growth, leading to plenty of record highs for the Dow, there have been significant plunges as well, both over periods of time and in dramatic single-day or single-moment drops. The family was launched in 1999 as the first global sustainability benchmark and tracks the stock performance of the world’s leading companies in terms of economic, environmental and social criteria.
