Dow Jones Industrial Average Celebrates 125 Years as Wall Street’s Bellwether

The Dow Jones Industrial Average (DJIA) is a United States stock market index that represents 30 large and 2 small industrial companies from the United States, and the United Kingdom. It is one of the most widely followed stock market indices and continues to be the most-widely quoted U.S. stock market index.

For the 125th anniversary of the stock market, the Dow Jones Industrial Average set a record for the most gains in one year. Since the index was first launched in 1884, the number of stocks in the index has risen from only 12 to more than 30,000 today. The index has been used as a bellwether for the markets in the United States and Europe and is generally considered the oldest, largest and most reliable stock market index in the world.

The Dow Jones Industrial Average, or DJIA, was launched in 1896 by Charles Dow, who was the editor of the Wall Street Journal at the time. Originally just a tool to track stock prices, the DJIA was then known as “the Dow”, and was an acronym for the Dow Jones Averages, the titles of the three indices that were included in the first update of the Dow Jones Industrial Average: General Motors, United States Steel and United States Sugar.. Read more about dow jones history and let us know what you think.One hundred and twenty-five years ago, the Dow Jones Industrial Average was launched.

On the first day of trading, 26. In May 1896, the 12-Smok index closed at 40.94. It included

General Electric Co.

As well as long forgotten names like American Cotton Oil and Distilling & Cattle Feeding.

Since then, the Dow has evolved along with the U.S. economy, giving investors from Wall Street to Main Street a glimpse of the financial markets during the Great Depression, the two world wars, and all the events that shaped the 20th and early 21st centuries.

According to Dow Jones Market Data, the year-over-year average increased 7.69% to 1,464 closings. In 1906 the 100 mark was exceeded, in 1972 the 1,000 mark and in 1999 the 10,000 mark. Also this year, as the U.S. economy slowed due to the pandemic, the Dow index fell from 31,000 to 34,000.

Dow Jones Industrial Average, monthly

Source: Dow Jones market data

An eventful quarter of a century

Over the past 25 years, the U.S. equity market
has been defined by historic events such as the dot-com crash at the turn of the century, the
global financial crisis of 2008-2009,
one of the longest bull markets in history (2009-20)
and, most recently, the epic Covid-era pullback and bull-run.

125 years of first-class actions

A lot has happened over the past century, but plotting the long-term performance of the Dow on a linear scale, as we do here, doesn’t tell the whole story. They might even overlook the
crash of 1929-32, a catastrophic
event. To better reflect the growth of the index over 125
years, the values can be plotted on a logarithmic scale.

Overview

On this logarithmic scale, the distance between each pair of evenly spaced horizontal lines
represents a 100% increase or a 50% decrease in
. The recession of the early 2020s was severe, but not close in percentage terms to the crash of 1929-32.
You can also see the turbulence of the index’s first 25 years: nine bear markets in
versus four in
over the last quarter century.

Economic cycles

Since the Dow was founded, there have been 25 recessions in the U.S. They often roughly coincide with the Dow Jones’ bear markets, but not always.
During the numerous recessions of the 1920s and 1950s,
stocks continued to rise without reaching a bear market, defined as a
decline of 20% or more from its peak.

Presidential mandates

Since the Dow launched at 26. In May 1896, there were 23
presidents, 10 Democrats and
13 Republicans.

Continuity

One of the characteristics of the Dow is that it is not sensitive to frequent changes
. In its 125-year history, the index has not changed composition in 17.
years. Since the
index rose from 12 in 1916 to 20 components and from 20 in 1928 to 30, it has become a more stable
.

During the climb many breaks were taken: No record has closed in the last 70 years, including the period from 1930 to 1953 when the stock market was below its 1929 high. There have been four years – 1910, 1962, 1977 and 2008 – in which the average closed each trading day below the previous year’s level. On one day in October 1987, the Dow fell 22.6%, and it was only worse on one day last March, when the Dow fell 12.9% during the coronavirus danger.

Over the longer term, growth in the economy and in corporate profits has led to a rise in the Dow Jones and in the US stock market in general.

U.S. equity markets have been strong instruments because they have been driven by a historic economy, said Randall Elay, president and chief investment officer of Edgar Lomax Co. Although there have been setbacks along the way, most of those setbacks appear to be historical mistakes, he said.

The Dow originated from an industry indicator that Charles Dow, the first editor of the Wall Street Journal, created to explain stock market movements to his readers. In 1916 the program was expanded to 20 titles and in 1928 to 30 titles.

The index created by Charles Dow has evolved over its 125-year history.

Photo:

Ullstein Picture/Getty Images

No stock has been in the Dow for 125 years.

After the first index adjustment, General Electric was part of the Dow for more than a century, from 1907 until its withdrawal in 2018.

Procter & Gamble Co.

The puff was added in 1932 and today is the longest-lived component in the world. Over the years, the following actions, among others, have come and gone.

Eastman Kodak Co.

Sears, Roebuck & Co, Woolworth and Studebaker.

As before, industrial companies are represented in the index, such as. B.

3M Co.

и

Boeing Co.

However, nowadays it also includes financial indicators such as

JPMorgan Chase

& Co. and consumer goods companies such as

Coca-Cola Co.

и

Walmart Inc.

and technology heavyweights

Apple Inc.

и

Microsoft Corp.

The Dow was last updated in August of last year.

Salesforce.com Inc,

Amgen Inc.

и

Honeywell International Inc.

Replace by

Exxon Mobil Corp.

,

Pfizer Inc.

и

Raytheon Technologies Corp.

Interestingly, if you look at the 30 stocks in the Dow today, they represent a whole new breed of companies where manufacturing is much less important than services and technology, said George Ball, chairman of the private equity firm Sanders Morris Harris. It reflects the difference in 125 years in what our country has done.

The Dow Index is managed by S&P Dow Jones Indices, a joint financial data company.

S&P Global Inc.

and the exchange operator

CME Group Inc.

Dow Jones, the magazine’s publisher, sold its last stake in the company in 2013, although representatives of the magazine sit on the committee that determines the composition of the index.

Change in the DJIA, six months and one year after each event

SEPTEMBER. TERRORIST ATTACKS OF 11 SEPTEMBER 2001

A CORONAVIRUS HAS BEEN REPORTED

GLOBAL HEALTH CRISIS

SEPTEMBER. TERRORIST ATTACKS OF 11 SEPTEMBER 2001

A CORONAVIRUS HAS BEEN REPORTED

GLOBAL HEALTH CRISIS

SEPTEMBER. TERRORIST ATTACKS OF 11 SEPTEMBER 2001

A CORONAVIRUS HAS BEEN REPORTED

GLOBAL HEALTH CRISIS

CORONAVIRUS

ADOPTED

GLOBAL

HEALTH CRISIS

Lately, the forces that have driven the US stock market as a whole can be seen through the prism of the Dow.

Last February and March, financial markets were gripped by fears of a pandemic hitting the economy, and the Dow Index fell to a closing level not seen since 2016. Then came the breakup.

Even as the pandemic worsened in the US, a potent elixir of low interest rates, generous fiscal stimulus and the hope that vaccines would fuel a strong economic recovery sent stock prices soaring. The index is up 7.2% in 2020, which was unthinkable to many during the deep sell-off earlier this year.

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What does the Dow index say about the US economy? Join the discussion below.

In just five months of 2021, it is up 12%, slightly more than the S&P 500 and about twice as much as the tech-heavy Nasdaq Composite, which is up 6%.

This advantage is partly due to the fact that the Dow is heavily represented by value stocks, which trade at low book multiples and have recently outperformed growth stocks. Many of these companies belong to sectors that tend to perform well during periods of strong economic growth.

Chevron Corp.

This year it has increased by 23%, while

Goldman Sachs Group Inc.

increased by 38%.

Since last fall, there has been a rotation of value-oriented stocks, and so the Dow has become more value-oriented, which has helped the index, said Stephanie Lang, chief investment officer at Homrich Berg, an asset management firm. You can see that these value names continue to gain ground as the economy recovers.

New York City’s financial district after the Wall Street crash of 1929.

Photo:

Hulton-Deutsche Collection/Corbis/Getty Images

Email Karen Langley at karen.langley@wsj.com.

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