Thursday, June 18, 2009

The Dow Jones (not so) Industrial Average

Pathways Advisory Group, Inc.
Dustin Smith, CFP®













The Dow Jones Industrial Average is not as industrial as it once was. When most people think of Industry, they think of production – the manufacturing of goods. The Dow has experienced a transformation, of sorts, over the past 20 to 30 years. Today, the Dow is more of a “Blue Chip” Index than the traditional “Industrial” Index that it once was. A closer look at the history of the index and its 30 components reveals some fascinating insights about major industry in this country – where we have been and where we are going.

On June 8th General Motors was officially removed from the Dow Jones Industrial Average and replaced by Cisco Systems. Dow components have changed many times over the years; however, the removal of General Motors is of particular significance. General Motors was the only remaining automobile manufacturer in the Dow, ending an 85-year presence of the industry. It’s a sad day – as the automobile is as American as baseball and apple pie. The Dow used to be dominated by industries like steel, railroads, and automobile manufacturing - it is no longer.

However, it’s also fascinating to ponder the future of innovation. Nearly half of the Dow is comprised of the following industries: Telecommunications (Verizon and AT&T), Information Systems (IBM, Microsoft, Intel, Cisco Systems, and Hewlett-Packard), Aerospace (Boeing and United Technologies Corp.) and Pharmaceuticals (Pfizer, Merck and Johnson & Johnson). And what doesn’t General Electric do? The Dow is full of innovative companies and industries. Traditional manufacturing and production is this country is not lost, but it has certainly given way to innovation. We live in interesting times…

What will the Dow Jones Industrial Average look like in 2025?

For a complete history of the Dow Jones Industrial Average and a current component listing, click the link below.
http://www.djindexes.com/mdsidx/downloads/DJIA_Hist_Comp.pdf

No comments: