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Putting the 19,000 Dow into Perspective

Putting the 19,000 Dow into Perspective

Ron Kelemen - Tuesday, November 22, 2016

The Dow Jones Industrial Average finally closed above 19,000 for the first time. Why do we say “finally”? Because it took a long time, 483 trading days over nearly two years. The gain from 18,000 to 19,000 comes to a 5.9% return. Doing the math, this comes to an average gain of 0.01% each trading day with a lot of volatility thrown in for good measure. Other milestones, from, say 16,000 to 17,000 happened faster and represented a higher percentage gain.

And that brings up another point: a 1,000 point gain ain’t what it used to be. The gain from 10,000 to 11,000 in 1999 represented a 10% gain, and the gain from 5,000 to 6,000 in 1996 equals a 20% advance—both occurring over shorter time periods.

Finally, while the Dow is a shorthand way of describing how certain equities in general are doing, it doesn’t give you a true picture of the financial markets. This index consists of only 30 very large stocks, excluding many other large, international, medium, and small companies and bonds, While the Dow is a celebrity index grabbing today’s headlines, the Nasdaq index has done much better recently. So enjoy this new benchmark, but party responsibly.

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