What is the Dow Jones Industrial Average?
by Amanda Young
On Wednesday February 6th the Dow Jones Industrial Average hit 20,084 basis points. Several questions you may be asking are: “What is the Dow Jones Industrial Average?”, What does the Dow surpassing 20000 mean for me?”, and “Why should I care what the Dow does?”. The intent of the article is to give you a general understanding of what the Dow Jones Industrial Average is.
The Dow Jones Industrial Average, or the Dow, is a stock that houses the top companies’ stock and is a measurement of how these stocks are doing. It consists of 30 stocks: Apple, American Express, Boeing, Caterpillar, Cisco Systems, Chevron, Coca-Cola, DuPont, ExxonMobil, General Electric, Goldman Sachs, Home Depot, IBM, Intel, Johnson & Johnson, JPMorgan Chase, McDonald’s, 3M Company, Merck, Microsoft, Nike, Pfizer, Procter & Gamble, The Travelers, UnitedHealth, United Technologies, Visa, Verizon, Wal-Mart, and Walt Disney. All of these stocks are either in the NYSE (New York Stock Exchange) or Nasdaq. If one of any of these stocks increases, climbs, or is green the Dow moves up and vice versa. This can mean a variety of affects. When President Donald Trump was elected into office, it turbo boosted the market. Construction and transportation stocks in particular rose significantly, due to President Trump’s promise of building a wall. The Dow Jones during this period skyrocketed, but remember when I said that if one of the 30 stocks increased then the Dow would increase? Well that’s exactly what happened. Strong earning by Boeing and JP Morgan Chase were the primary reason that pulled the Dow across the 20000 finish line.
The Dow Jones industrial Average is not an accurate measurement of our economy’s progress, although the media loves to portray it as such. It is severely flawed. One major reason that it is inaccurate is that the Dow is not weighted. All the stocks will rise and fall based on the other 30 stocks in the index. Nevertheless, the Dow itself has been a part of the market since 1882, and getting rid of the whole stock would be insufficient due to the prestige it has acquired throughout the years. A lot of analysts throw around the idea of reinventing the Dow or making a branch that will be able to give a more accurate measurement of the US economy.
I hope this article helped you at least understand what the Dow Jones Industrial Average is and does. Throw around some of these thought at dinner and see what feedback you get. If you want to learn more about the market, please come join Young Entrepreneurs. Make sure to watch out for new upcoming articles about the economy. Until next time.
Extra Fun Stuff About the Market:
– The NYSE and Nasdaq house the “big boys” of the market. For a company to be listed under the NYSE they have to meet a series of rigorous requirements.
– For the requirements of the New York Stock Exchange see http://venturelawcorp.com/listing-requirements-of-the-new-york-stock-exchange/
– For the requirements of NSADAQ see http://www.investopedia.com/ask/answers/121.asp
– For more articles about the Dow hitting 20000 see http://blogs.wsj.com/moneybeat/2017/01/25/as-dow-crosses-20000-heres-what-to-read/