After Friday’s market close, we will experience the dawn of a new Dow Jones Industrial Average (DJIA). It’s certainly not the first change to come to the average but is will likely be one of the more interesting ones.
Dawn a New Dow
The Dow is the most quoted equity index in the world and, for well over 100 years, I believe it has caused too much confusion. It’s not even an “index.”
Russ Wiles said it well in Sunday’s Arizona Republic: “The DJIA is an inferior and maddening stock-market barometer. . .”
It is an average based on the prices of the stocks of the 30 companies included while the stocks with the highest prices carry the most weight. It is about to be heavily influenced by financial companies not what we typically consider industrials.
Say bye to: Alcoa, Bank of America and HP.
Say hello to: Goldman Sachs, Visa and Nike.
Goldman Sachs and Visa will likely now join IBM and Chevron as some of the priciest stocks in the Dow meaning they’ll carry a lot of weight. The financial sector can still be viewed as vulnerable and is certainly volatile so I expect to see some interesting days ahead for the DJIA.
It may not matter much to your portfolio so don’t go mad thinking about it.
Take a look at the list of DJIA components below and think about the correlation to your portfolio (not a recommendation to buy). Or, call me and I’ll help you analyze it.
Embrace the dawn (we weren’t given a choice),
Susan R. Linkous
DJIA (eff. 9/23): American Express, Boeing, Caterpillar, Cisco, Chevron, EI du Pont, Walt Disney, General Electric, Home Depot, IBM, Intel, Johnson & Johnson, JP Morgan Chase, Coca-Cola, McDonalds, 3M, Merck, Microsoft, Pfizer, Procter & Gamble, AT&T, Travelers, United Health, United Technologies, Verizon, Wal-Mart, Exxon, Visa, Goldman Sachs and Nike.
Note: The above comments are my opinion. Please seek professional advice before investing. References to past performance are not guarantees of future results. Indices cannot be directly invested into and are unmanaged.
Have a great week!